Is the index finally buyable? Plus what to do with NFLX, TSLA, and AMZN

By Jani Ziedins | End of Day Analysis

Apr 28

Free After-Hours Analysis: 

Keeping the theme consistent, Thursday’s session was another wild seesaw day. An opening pop fizzled and retreated back to 4,200 support before bouncing hard and launching 100 points higher by the close.

As I’ve said previously, this remains an emotional and volatile market, meaning big moves in both directions. But after four days of testing 4,200 support, it is still holding. That’s no small feat. Now the question is if bulls can do something with Thursday’s monster rebound.

Sell the breakdown and buy the rebound. While that approach lead to a lot of tail-chasing lately, the daily moves have been large enough that if we get in early, we build up a nice profit cushion relatively quickly, making all of these low-risk trades.

While I haven’t been making money from these whipsaws, that was never the intent. The only goal is to be in the game with the lowest risk possible. While the first few trades didn’t work, one of them is going to. And that’s the one that makes all of this effort worthwhile. (March’s rebound covered 10% in a few weeks. Catch that in a 3x ETF and no one even remembers the first few failed bounces.)

Will buying Thursday’s bounce turn into our next mega trade? Maybe. Maybe not. But we can’t profit if we don’t try. By getting in early, we already have a nice profit cushion, making this yet another low-risk/high-reward setup.

Maybe it works, maybe it doesn’t. But if the worst thing that happens is I get dumped out at my entry point, why not give it a shot?

This is turning into an ugly month for expensive stocks. First, it was NFLX. Then TSLA. And now AMZN.

While the index looks like it wants to bounce, all of these falling highfliers are making it difficult. It will take NFLX and AMZN a while to dig out of these holes, but TSLA could be interesting since the volatility in the stock has nothing to do with the underlying fundamentals. Buy Thursday’s bounce with a stop under the intraday lows and see where this goes.

As for NFLX and AMZN, they could be good for a quick, dead-cat bounce trade, but it will be months before these are investable again. Expect both of these to carve out a series of lower lows and lower highs over the net six months. And then they will probably be dead money for another six months before finally recovering.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.