Why smart money was buying Wednesday’s bounce

By Jani Ziedins | End of Day Analysis

Oct 04

Free After-Hours Analysis: 

The S&P 500 bounced 0.8% on Wednesday.

Headlines haven’t changed in a meaningful way, and this rebound is nothing more than the market running out of herd-sellers and dip-buyers jumping on those discounts. Lucky for readers, this bounce is precisely what I wrote about in Tuesday evening’s free post:

The S&P 500 is quickly approaching 4,200 support and the 200 dma. No matter what the future holds, we should expect at least a modest bounce at these widely followed technical levels. Maybe we violate these levels a few days later, but over the next day or two, the odds are good prices will bounce, making this the wrong place to be aggressively pressing shorts.

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While Wednesday’s gains were not enough to offset Tuesday’s painful losses, not falling is a good first step.

I have no idea if Wednesday’s bounce is the real deal or if it is another false bottom on our way lower. But since this bounce was fairly obvious, savvy money jumped aboard it early and took advantage of the quick profit cushion it gave us.

With a fair bit of room between Wednesday’s close and our entry points, it is time to move our stops up to our entry points, turning this into a low-risk trade. If the rebound continues on Thursday, we allow those profits to come to us. If the selling resumes, we get out nearly our entry points, no harm, no foul.

Only a fool would turn his nose up at a free trade. Even if this isn’t the bottom, this is still a fantastic risk/reward and I will make this trade one thousand times over. Hopefully, you didn’t miss this great opportunity.

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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.