Why savvy traders don’t need to fear this technical triple-witching

By Jani Ziedins | End of Day Analysis

Jan 17

Free After-Hours Analysis: 

The S&P 500 finished the first day back from the long holiday weekend down a modest 0.2%.

Not much happened headlines wise and this continues to be a sentiment-driven market. Given how the index rests nearly 200 points above where it started the year, there has definitely been a thawing of last year’s half-empty way of looking at things.

While the economy is still struggling with some headwinds, we clearly avoided last year’s worst-case scenario and stock prices are rallying on this less-bad-than-feared news.

But for as nice as this 200-point rally looks in the rearview mirror, we are currently struggling with the triple-witching of 4k resistance, the 2022 downtrend line, and the 200dma. Any one of these is more than enough to put the lid on a rebound, and all three of these did exactly that a various points in 2022.

So the question becomes, should we be afraid of another rejection, especially with all three hitting us at the same time?

While there are lots of reasons to doubt this rebound, we trade the price action, not our beliefs and fears. Sure, these hurdles could send prices tumbling back to the lows. But until they actually start doing that, we have to give this rebound the benefit of the doubt.

A trend is far more likely to continue than reverse, and no matter what anyone else says, the trend is higher. Without a doubt, we should expect some choppiness near these significant technical hurdles, but until these resistance levels actually break the market, we should be positioned for the continuation, not the reversal.

The greatest advantage of being an independent trader is the nimbleness of our size. We don’t need to trade the breakdown until after it starts happening. If our trailing stops get hit, we get out. Until then, keep riding this wave higher.

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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.