How savvy traders are profiting from this volatility

By Jani Ziedins | End of Day Analysis

Jan 11

Free After-Hours Analysis: 

The S&P 500 added 1.3% Wednesday and the index now finds itself at the highest levels since early December.

So much for Monday’s ugly intraday reversal. But that’s the way this goes sometimes. If this were easy, everyone would be rich. The market frequently throws curveballs at us and Monday was one of those days. Sometimes it has to convince us we are wrong moments before proving us right.

The key to surviving these whipsaws and false alarms is staying nimble and having a solid trading plan. Anyone winging this is getting eaten alive as they keep getting fooled into buying high and selling low. But if we have a thoughtful trading plan that gets us in early and gets us out early, then not only are we surviving these whipsaws, we are actually thriving in this volatility.

As hard as it was to buy Tuesday’s rebound following such awful price action on Monday, that was clearly the right call. And a savvy trader was adding even more money Wednesday morning. Big money came back from Christmas vacation in a buying mood and smart money is following those whales.

Now that the index is well above our entry points, we can lift our stops, making this a low-risk trade where at worst we get dumped out for breakeven.

If we’re right, we make money. If we’re wrong, we lose nothing. It is impossible to beat that risk/reward.

4k resistance and the 200dma are up next. These were stumbling blocks back in November and December. But at this point, the market is acting well and deserves the benefit of the doubt. That means we keep riding this wave until it breaks down. Move stops up and see where this goes.

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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.