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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.
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Tuesday was another bad session for the S&P 500. The index lost 0.7%, adding to Monday’s 0.5% loss and making this give-back the biggest in a month.
Let’s be honest, things must be pretty good if the biggest thing we are worried about is a two-day, 1.3% decline. That said, every big selloff starts off small.
So which is it? An insignficant wobble on our way higher? Or the start of the next downturn?
Since both of these outcomes start the same way, looking backward won’t give us the answer. Instead, we have to look toward what comes next, most importantly, what happens Wednesday. If prices slump at the open and the selling accelerates, this dip isn’t done and we still have a ways to go. On the other hand, open weak, bounce off of those early lows, and close well above those lows, the worst is already behind us.
This divergence on Wednesday forms the basis for our next trade. Bounce and close well, that is a buy signal with a stop under the intraday lows. If Wednesday’s selling cannot find a bottom, lock-in profits in our existing positions and agressive traders can short a violation of 4,100 with a stop just above this level.
Most likely this is nothing more than a minor wobble on our way higher. But we are due for a down wave and if it is getting started, we don’t want to be caught on the wrong side of it.
NFLX reported disappointing subscriber growth after the close and got smacked in after-hours trade. There are only two ways this plays out. Either this is a lot of nothing and the stock will continue higher. Or this is the start of the next big pullback. In a stock with such a sky-high valuation, there no room inbetween.
Much like the above index trade, it all comes down to how NFLX closes Wednesday afternoon. Bounce from the early lows and this is buyable with a stop under the midday lows. On the other hand, close near the lows and this turns into a short..
Let the market tell us what direction this stock is deaded and then hang on for a quick buck.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
On Monday, the S&P 500 experienced its biggest loss in nearly a month. That said, “biggest loss” only amounted to a 0.53% decline. This shows just how gentile and benign this rally has become.
Two steps forward, one step back. That’s how this works, always has, always will. While no one is flinching over a 0.53% decline from record highs, there will come a time when these losses start piling up. And by the time people become worried about it, a good amount of damage will have already occured.
Now to be clear, I’m not a bear or anything remotely close. But I’ve been doing this long enough to know this rate of gains cannot continue indefinitely. And once this surge runs out of gas, there are only two options left, sideways or down. Either way, that is a far better time to be locking in profits than adding new money.
For those that have been following these posts for a while, we are sitting on a pile of profits and it is time to get defensive and protect those profits.
Once we give up on the foolish idea of picking tops, we realize the only two choices left are selling too early and selling too late. And as is usually the case in the market, this doesn’t have to be a binary decision. Don’t think all-in and all-out, instead trade in shades of gray. It is perfectly okay to take some profits and let the rest ride with a trailing stop. That gives us the best of both worlds.
For the time being, I’m holding for higher prices but if I see further weakness and closes near the daily lows, I will start peeling off profits proactively even if my stops haven’t been hit.
And you know what? Once I sell, there is nothing that prevents me from getting back in when prices bounce. It’s like having your cake and eating it too! Never forget, we only make money when we sell our winners.
Bitcoin tumbled under $60k support as it turned into a source of funds to fuel this borderline absurd Dogecoin rally. While I don’t have a problem buying something that is going up (meaning Dogecoin is a legitimate trade), but that is only as long as people are trading this and not investing in it. As long as a person is agile and willing to take profits, they can ignore all Dogecoin critics. But if a person believes the hype, good luck with that.
As for Bitcoin, the $60k breakout failed and it is best to get defensive until this gets back above $60k. Until then, expect the ride to get bumpy.
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By Jani Ziedins | End of Day Analysis
Free End of Week Analysis:
After spending most of February and March consolidation between 3,900 and 4k, the S&P 500 finally broke out and launched itself nearly 5% in just two weeks.
Coil…spring…coil again…spring again…
So far everything is going according to plan. That said, 5% in two weeks is steep even for the most bullish of markets. That means at the very least, we should expect the rate of gains to slow down over the near term.
Expecting a slowdown doesn’t mean I’m bearish, just that I’m realistic and have been around the block a few times. Two steps forward, one step back.
That said, we don’t need to bail out of this market until the next dip actually starts. Keep holding for higher prices as long as the index remains above our stops in the upper 4k’s/lower 4,100s. Just because another 5% move is unlikely doesn’t mean it is impossible.
Savvy traders let the market tell us when it is time to lock in profits and so far this one isn’t signaling us yet. The biggest warning sign of faltering demand will be a couple of fizzles into the close. That is a good sign to lock in some profits proactively and we don’t need to wait for the market to hit our stops.
If there is one warning sign of a looming slowdown, it is the lethargic behavior of the FAANG stocks this week. These best-of-the-best stocks helped launch the 4k breakout, but these same stocks lagged behind badly this week.
If they get their act together next week and start outperforming again, all is forgiven and forgotten. But if their underperformance continues next week, expect this to weigh on the entire market and the near-term consolidation/pullback is upon us.
As we saw in February and March, the index cannot rally without the biggest stocks participating.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 popped 1.1% Thursday and is up 8% in three weeks. (Trade that with a leveraged ETF and the profits are spicy!)
Three weeks ago investors were cowering from spiking Treasury yields. Now I cannot even remember the last time I saw an article mention Treasury yields. But that’s the way this always goes; buy the fear and sell the relief.
As good as this trade has been, only a greedy fool expects the index to surge another 8% by early May. I’m not suggesting people rush out and sell everything because “stocks are too high!”, but I am saying we need to be far more careful following a nice, one-direction run like this. (Everyone knows stocks move in waves.)
Keep holding for higher prices but move up our trailing stops and consider locking in some profits proactively if the index stumbles into the close on Friday or early next week.
Wednesday was an awful day for TSLA and things were only marginally better Thursday. The stock popped early Wednesday and challenged $800 resistance, but rather than chase prices higher, investors hit the sell button and the stock ultimately finished down 4%.
While I’m not going to give up on this stock because of one bad day, but this intraday fizzle was a huge warning flag. The important thing is the stock stabilized Thursday and the selling didn’t continue.
Everything is fine as long as TSLA remains above $700, but lock-in profits if this retreats under $700 because the selling won’t stop until it hits $600 support. (The most aggressive trader could short a violation of $700 with a stop just above this level.)
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 “tumbled” on Wednesday. Or at least that’s the way a 0.4% loss feels after such a pleasant climb following the 4k breakout.
This rally to the mid-4,100s has been a little too easy and as such, some near-term selling is inevitable. Nine up days over the last few weeks will most likely be evened out with several days of selling. (Everyone knows markets move in waves.)
That said, there is no reason to rush out and abandon this market simply because we’ve gone up too many days in a row. As ridiculous as this feels, nothing prevents this from getting even more ridiculous before the inevitable pullback. (Just ask all the people that sold at 3,800, 3,900, and 4,000.)
As long as this remains above our trailing stops in the mid-4k’s, keep holding for higher prices. While we might experience further near-term weakness, there is no reason to assume anything fundamentally changed and this bull market is still very much alive and well.
GME bounced back pretty hard following a long string of down-days. But until we get above $200, this is nothing more than another lower-high on our way back to $100. GME is definitely a buy above $200, but until we get there, this remains a strong short candidate.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Tuesday was another record close for the S&P 500, this time cresting 4,140 for the first time ever.
These gains mean we rallyed more than 400 points since March’s Treasury yield pullback. That’s 11% over a handful of weeks if you play the normal game and a whole lot more if you take advantage of levered ETFs (like I do).
As boring as this market seems, there have been plenty of opportunities to make good money riding this gentle glide higher.
The looming complication is sentiment typically flips after becoming too obvious. A few weeks ago, it was obvious spiking interest rates were going to kill this bull market. And now it is obvious fundamentals don’t matters and prices will continue higher forever.
As contrarian traders, we need to be ready to go against the crowd. That does NOT mean buying a falling market or selling a rising one. That is arguing with the market and no one every wins an argument wit the market. But now that prices have gone too far in one direction, we need to have A PLAN to deal with the inevitable snapback WHEN it happens (and not a moment sooner).
The easiest and most most braindead way of protecting our backside is following this rally higher with a trailing stop. The most undeniable aspect of any pullback is declining stock prices. If prices fall under our stops, we get out. Easy as that.
There are other signs the rally is running out of gas, but none of those apply to an index that keeps making fresh highs. We can dig into those warning signs when prices retreat from the highs, but until then, keep holding for higher prices and continue lifting our trailing stops.
This rally will end at some point, but this is not that point.
Bitcoin broke out above the old $60k highs and added another 5%. So far so good. Keep holding for higher prices with stops just under $60k. If this breakout fizzles and retreats back into the consolidation, demand isn’t ready yet. But as long as this cryptocurrency remain above $60k, keep holding for higher prices.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 spent most of the day ever so slightly in the red, but that 15-point dip couldn’t stick and this stubbornly bullish index finished near breakeven.
No doubt this rally cannot remain this easy and brainless for much longer, but as long as it continues trading well, there is no valid reason to argue with what is working.
Trading is hard enough and we don’t need to make it harder by arguing with the market. Keep following the index higher and lift our trailing stops. This will run out of momentum at some point, but it will go a lot higher than most people think before it does.
GME‘s latest flirtation with $200 is ending in disappointment. I was impressed with how well the stock was holding near $200 and that often indicates the stock wants to break through resistance. But there always comes a point where resting turns into stalling. As I wrote last week:
GME has clearly crossed the tipping point into stalling and things are not looking good for the stock. This is why it is so important to wait for the breakout before committing. One, it requires the stock to demonstrate its strength before we put our money at risk. And two, it creates a clear stop loss level to protect our backside.
If GME cannot arrest this fall in a real big hurry, expect the selling to accelerate and for prices to tumble under $100 in the blink of an eye.
This remains a strong short until it gets above $200.
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What’s a good trade worth to you?
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Follow Jani on Twitter @crackedmarket
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