A low-risk short trade near 5,100

By Jani Ziedins | End of Day Analysis

Feb 26

Free After-Hours Analysis: 

The S&P 500 slipped 0.4% Monday, following last week’s big run to record highs.

Impressive earnings from market darling NVDA sent the index flying 105 points last Thursday, but so far, the index is struggling to add to those big gains in the follow-up sessions.

Too high, or not high enough? That’s the million-dollar question.

Both sides have compelling arguments. Few things are more powerful than momentum, and this rally is red-hot. But on the other side, all good things must come to an end and this rally is no different.

At this point, I give a very slight near-term edge to the bears. Not because I think this rally is topping but because savvy traders can enter a low-risk/high-reward short trade at current levels.

The market is pausing at 5,100, giving us a low-risk shorting opportunity with a stop near Friday’s intraday highs. If momentum continues higher, we get stopped out for a small loss. On the other hand, a very vanilla pullback to 5k will produce profits of many multiples of that risk.

Low-risk, high-reward trades are what traders dream of, and here’s a good one.

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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.