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By Jani Ziedins | End of Day Analysis , Free CMU
Free After-Hours Analysis:
The S&P 500 bounced off of 4,450 Thursday, making this the second day in a row 4,450 support held.
Headlines are a mess, which is to say, not much has changed.
Investors are slowly coming to terms with our new reality and most owners who are afraid of these things bailed out a long time ago. Running out of fearful sellers is keeping supply tight and putting a floor under stocks.
Two steps forward, one step back.
The index exploded 450 points higher from March’s oversold lows. But as expected, we have fallen into a very normal and healthy step back from those highs.
Is a 180 point pullback enough? Maybe. Maybe not. We won’t know until after it happens, which means as traders, we have to make decisions based on incomplete information.
While most people try to guess which bottom is the real bottom, I’ve been doing this for far too long to fall for such foolishness.
I realized a long time ago I can’t pick bottoms. But just because I can’t pick a bottom doesn’t mean I cannot trade bottoms. In fact, buying dips is one of my favorite ways to make money. But rather than guessing which bounce will be the real bounce, I hedge my bets by buying ALL of them.
Start small, get in early, keep a nearby stop, and only add to a position that is working.
Following those simple rules, I buy all of the bounces. Some of them work. Most of them don’t. But by starting small, getting in early, keeping a nearby stop, and only adding to a position that is working, the cost of being wrong is small.
In fact, many times I actually get in early enough to make a few bucks buying the wrong bounce. That’s because I quickly lift my stops to my entry points and then even a little higher as the bounce progresses. And when the bounce fizzles, I pull the plug at my raised stops, collect a few bucks, and wait for the next bounce.
The key is starting small and getting in early. And of course, keeping a nearby stop and only adding to a position that is working. Have I mentioned that yet?
But seriously, as nimble traders, there is no reason we have to pick and choose bottoms when we can simply buy all of them with very little risk.
I’ll let other people guess, for me, I’m sticking with the sure thing.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 continued struggling with 4,600 resistance Tuesday, but this isn’t a surprise. Last week I wrote the post: “Now that we have a mountain of profits, how to protect them“. In it I said:
Now that we’re at the highest point since the 2022 correction started and within 200 points of all-time highs, we should expect the rate of gains to stall, if not outright retrench in a very normal and healthy step-back. Retesting 4,400 wouldn’t be a surprise. In fact, that step back is far more likely than continuing to record highs above 4,800.
Well, here we are, a few days later and the market is nearly halfway back to 4,400 support. Funny how that works.
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As I’ve been saying all year, markets move in waves. That was just as applicable at the bottom of the wave, as it was back in early March, as it is following a huge, 450 rebound from those very same lows.
Stocks go up and stocks go down, that’s what they do. Yet every time it happens, people get caught off guard.
Anyway, back to Tuesday’s price action, it was awful. An early test of 4,600 resistance failed and the index closed at the intraday lows. That’s not a good sign.
While headlines remain dreadful, they are not getting worse. “Less bad than feared” was good enough to rebound from last month’s oversold levels. But now that huge wave of buying is behind us and it is getting a lot harder to convince new buyers to pay these premium prices.
Tight supply got us here, but we need new demand to keep going. And unfortunately, it’s nowhere to be found.
Maybe after the index retest 4,400 support and bounces, buyers will finally start feeling more comfortable at these levels. But until then, we continue sitting on the pile of profits we locked in last week and wait for the next bounce.
Be ready because it could come as soon as Wednesday. (Start small, get in early, keep a nearby stop, and only add to a position that’s working)
TSLA is blowing the doors off the competition, this time by announcing a huge stock split. While I don’t buy into the hype around stock splits, I love anything that is going up and TSLA definitely fits in that category. Good thing we’ve been in TSLA since it bounced off of $800 last month. Now there is nothing to do but lift our stops up near $1,050 and see where this goes.
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How about avoiding a loss?
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