Why bulls should be collecting profits

By Jani Ziedins | End of Day Analysis

Oct 11

Free After-Hours Analysis: 

Wednesday was another volatile session for the S&P 500 as early gains gave way to midday losses that were then recovered by the close. After it was all said and done, the index finished up a respectable 0.4%. Not bad for a day’s work.

Aside from the developing situation in the Middle East, economic headlines haven’t changed in a meaningful way over the last few weeks. Wednesday’s gains make this four up-sessions in a row, and the index continues bouncing back nicely from September’s oversold levels.

As is often the case, sometimes we have to look like idiots before we can be geniuses. That was definitely the case buying last week’s lows. Lucky for me, I don’t I don’t have a problem looking like an idiot. In fact, the more people disagree with me, the better I feel about my position.

As I wrote in last week’s free analysis:

I have no idea if 4,200 support will hold up next week, but it is holding right now, and that is good enough for me. I bought [last week’s] bounce and already lifted my stops up to my entry points, turning this into another low-risk trade.

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Without a doubt, ending like a genius is far better than ending like an idiot. Just ask all of the greedy bears that watched nearly 200 points of profits evaporate in front of their eyes. Nothing is wrose than watching a nice profit turn into a painful loss.

But rather than get cocky and gloat, these 3x profits are making me nervous. Everyone knows stocks move in waves, and that means after a nice bit of up, it is time to collect our worthwhile profits and get ready for the next trade.

Without a doubt, I’m selling too early, but we only make money when we sell our winners, and I really like these 3x profits. It would be criminal to allow greed and hubris to make me join the bears by holding too long and watching all of my profits disappear.

The 50dma and 4,400 resistance is just above our heads, making this a good place to collect our 3x profits. If the rally wants to smash through 4,400 next week, it is easy enough to buy back in. Until then, I nothing beats the calm and clarity that comes from sitting on a pile of profits while enjoying the safety of the sidelines.

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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.