All Posts by Jani Ziedins

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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.

Feb 10

CMU: Is the market rigged?

By Jani Ziedins | Free CMU

Cracked.Market University

Spend any time with retail investors and it is almost guaranteed you will hear someone will complain, “the market is fixed.” This is one of the public’s most persuasive myths about the stock market. These people are convinced there is an evil puppet master rigging the system against hem.

My question to these cynics is always, “If you know the market is fixed, why would you do something so stupid as trading against it?” If they know for a fact big money is going to buy every dip, why would they do anything other than buying every dip? Don’t complain, take these valuable insights and profit from them! Complaining about it makes no sense.

In all honesty, I wish the market was fixed. That would make this so much easier. If there was a puppet master pulling the strings, all I need to do is figure out what his intentions are and follow along. Pilot fish swim behind sharks and live off the scraps. I’d be thrilled making a living as a pilot fish following the market manipulators and profiting from their leftovers. Unfortunately, there are no sharks controlling the market for me to team up with.

People think big institutions, high-frequency traders, hedge funds, and even the Fed is conspiring to ruin their trades. But if you spend any time reading the financial press, it doesn’t take long to realize these big institutions and hedge funds struggle with unprofitable trades just as much as we do. If these big players were rigging the system against us, don’t you think they would be making a ton of money? The brutal truth is 75% of professional money managers fail to even keep up with the dumb indexes every year. If these big players are manipulating the market, they sure don’t do a very good of profiting from it.

To be perfectly frank, what people really mean when they claim the market is fixed is, “I lost money and I refuse to take responsibility for my poor trading decisions”. Don’t be that guy! Take responsibility for your bad trades. Own up to them. Learn from them. And most importantly, don’t blame them on anyone else.

Just because your trade didn’t work doesn’t mean someone is out to get you. It simply means you didn’t understand all the factors at play. Learn from those mistakes and do better next time. Victims blame other people, don’t learn from their mistakes, and never succeed in this business. Don’t fall into that mindset.

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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Feb 07

Is there such a thing as “too good”?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The monthly employment report came in better than expected. In fact, the market actually thought it was a little “too good” and the S&P 500 dipped on the news. Traders are not rooting against the US economy but they are leery an overheating economy will pressure the Fed to back away from its accommodative monetary policy.

While people have feared “too good” for years, good news hasn’t held stocks back in more than half a decade. But old habits die hard and people keep reflexively selling good news because they think maybe this is the one that finally breaks this bull. Yeah, I don’t think so. This logic didn’t work last time and there is a good chance it won’t work here either.

Investors are also a little skittish about potential Coronavirus headlines over the weekend. Two weeks ago the market was hammered Monday morning and there is still a little “better safe than sorry” thinking going around the market ahead of this weekend.

But the thing about selling ahead of time is it actually reduces the risk of holding through the weekend. The more stocks go down now, the less room they have to fall Monday morning. This isn’t to say we cannot open even lower, but today’s 20-point decline took some sting out of any headlines that might crop up this weekend. And if nothing bad happens, expect those 20-points to come racing back Monday morning. We fear a market that is oblivious to the risks, not one that is preparing for them.

So far the market is acting really well and anyone who bought last Friday’s dip or this Monday’s bounce is sitting on nice profits. Move your stops up and start reviewing your plan to take profits. When the crowd finally starts thinking it is safe to start buying again is when we want to be selling.

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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Feb 06

CMU: Always have a plan to take profits, TSLA edition

By Jani Ziedins | Free CMU

Cracked.Market University

As I wrote Monday, I like mixing the topic of these posts up a bit more but it is hard to ignore what is going on with TSLA. Not very often do we have the opportunity to witness one of these things blowing up in real-time and be able to dissect it as it happens.

In case you are living under a rock, TSLA had the biggest two-day run in the stock’s history earlier this week, at one point surging nearly 50% from Friday’s close. But as expected, that rate of gains was not sustainable. And not only did the rate slowdown but now it appears like the bubble burst. Wednesday the stock crashed, giving up the majority of those gains in a single session. Thursday’s rebound attempt was valiant but ultimately unsuccessful.

The reason I’m writing this post is because when trading, it is essential we always have a plan to take profits. If someone was fortunate enough to be in TSLA on the way up, great for you. But if you don’t act, it will all be for naught. If we are in this to make money, the only way we do that is by selling our biggest winners.

All too often people get caught up in the moment and start believing the hype. They know something other people don’t. That history doesn’t apply to this particular situation. While part of them deep down knows they should be taking profits, they are so afraid of missing out they cannot bring themselves to do what needs to be done.

Unfortunately for most of the people involved in TSLA’s staggering move this week, everyone who rode it all the way up is now riding it all the way down. As unbelievable as this sounds, at one point Thursday nearly everyone who bought TSLA shares in the best week of the stock’s entire history was sitting on fairly sizable losses. As my dad always liked to remind me after screwing up, easy come easy go.

And I wish I could say the worst was over. Unfortunately these things are even more spectacular on the way down. The market likes symmetry and the fall will be just as jawdropping as the rise. Expect this to go far beyond what anyone thinks possible. Just ask Bitcoin bulls how bad it got after that cryptocurrency fell from its parabolic highs. While I don’t expect the same magnitude of collapse here because Tesla is a real company with real value behind the stock, it will get shockingly ugly before this episode is over.

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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM $TSLA

Feb 05

CMU: Lesson 2: Trade proactively, not reactively

By Jani Ziedins | Free CMU

Cracked.Market University

This post continues the series expanding on of my 23 Trading Rules.

Lesson 2: Trade proactively, not reactively.

That sounds easy enough but the truth is very few people actually trade this way. Our natural instinct is to follow the crowd. We can blame this tendency on our ancestors. When everyone else was running away screaming, the guy who stuck around to see what all the fuss was about quickly turned into lion food. Those that ran instinctively alongside the crowd lived longer and passed their genes along to the next generation.

While those survival instincts worked great on the African savanna, they are not helpful in the financial markets. In fact, this misplaced gut reaction is the single biggest factor contributing to why so many people wash out of the market every year. These unfortunate traders didn’t survive long enough to learn how to control their natural impulses and they ended up falling victim to the market’s cruel tricks.

No doubt I’m preaching to the choir because anyone with even the smallest amount of trading experience knows what I’m talking about. We’ve all been guilty of it at some point. And if you claim it never happened to you, either you are a liar or your brain is miswired!

Running when everyone else is running is reacting to what the crowd is doing. So is getting nervous and scared and when everyone else is nervous and scared. Other times the crowd infects us with optimism and greed. No matter what the crowd is doing, it is nearly impossible to not at least feel the tug of those same urges.

If reacting to what the crowd is doing is the wrong way to trade, what is the right way? Easy, do the opposite. Get ahead of the market by moving proactively. Rather than wait to sell until after prices tumble from unsustainable levels, bailout while everyone else is still in a good mood. Instead of panicking when everyone else is selling, recognize the value of those irrational discounts and start buying what the crowd is selling. Rather than chase prices higher, buy before it is obvious to the crowd.

While it is nearly impossible to deny our emotions, the best way to manage them is by drafting a trading plan when nothing important is going on. When the market is boring you to tears, spend that time planning what you will do when it stops being boring. What price move would convince you to buy? What would convince you to sell? When will you take profits? When will you admit defeat and pull the plug? Write those things down and commit to acting on that plan before the crowd starts pressuring you to react. That way when you feel the urge to join everyone else running away, you pull out your plan and use those premeditated decisions to overpower your natural impulses.

It’s an overused market cliche but few things are more important to long-term success than  “planing your trade and trading your plan.” Stay ahead of the crowd and you will be far better off than everyone else reacting impulsively to every bump and gyration in the road.

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Tags: CMU $SPY $STUDY

Feb 04

The right way to buy this rebound

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The following is a brief excerpt from the Premium Analysis email I delivered to subscribers today during trading hours and builds on Friday’s free post. Since this covers exactly what I wanted to write about this evening, why recreate the wheel? If you like what you see, have this and more delivered to your inbox every day during trading hours while there is still time to act on these insights.

The S&P 500 popped this morning and is inched toward 2% gains. What was the source of this strength? Well, if we go strictly by the biggest headlines, it is the ever-expanding Coronavirus epidemic and the voting mishap in Iowa. Those seem like strange headlines to rally on but that is exactly what we got.

Obviously the market isn’t rallying because of those headlines. But more importantly, we can say the market is rallying despite those headlines. Traders are shrugging off news that very easily could have sent us tumbling under the lows again. Instead, most people are choosing to ignore the noise and are buying stocks anyway. The encouraging sign is there are few things more bullish than a market that refuses to go down on bad news.

Granted, this is only the second day of this rebound attempt and it is definitely premature to claim the selloff is dead, but this is definitely a good start. If this market was fragile and vulnerable, today’s headlines were definitely bearish enough to send us lower. Instead, prices bounced and that tells us this market wants to go higher, not lower.

The market looks great, unfortunately, anyone who waited for the clouds to clear missed a lot of this week’s discounts. And more than just paying higher prices, these gains expose late buyers to the increased risk of an intermediate dip. The best buys always come when uncertainty is at its highest. Throwing some money at the market Friday afternoon and yesterday morning was tough, but those smart buys gave us 1) good entry points, 2) the safety of nearby stop-losses, and 3) a fair amount of profit cushion to ride out any near-term undulations.

As always, the best plan is to start small and add to a position only after it starts working. A small buy on Friday afternoon was followed up by another position Monday morning. Do that and we are in good shape to add a little more today. The challenge with today’s purchase is the sensible stop-loss is all the way back at yesterday’s close. Not ideal, but we have to take what the market gives us. At least the prior profits give us some padding to cushion against any near-term gyrations.

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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Feb 03

Why TSLA is going to be like TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Normally I like to mix the subject of these free posts up a bit, but TSLA keeps dominating the headlines and it is hard to ignore what is going on over there.

Shares exploded 20% today and you’d think the company made a huge breakthrough. Nope. An anonymous analysist upgraded the stock. While an upgrade is definitely better than a downgrade, the thing to remember about analysts is if they knew how to trade, they wouldn’t be an analysists. Think about that the next time you feel the urge to trade based on their opinions.

As for my opinions, I got a fair amount of criticism for my post last week when I said people need to be careful chasing TSLA at these levels. While I’m sure my critics are strutting around today, this pop doesn’t change anything. This is an incredibly dangerous place to be buying the stock and I have no doubt it will end in tears for many people.

I’ve been doing this a long time and could cite countless examples from WMT, MSFT, PALM, AOL, BB, Oil, Gold, Bitcoin, or any of the thousand other investments that made explosive moves. But if I did, no doubt my critics would complain that TSLA is different. Okay fine, I can work around that. Let’s compare TSLA to TSLA.

TSLA came public in 2010 at $17 and obviously it’s been a great ride since then. But it hasn’t been all up. In fact, there has been a whole lot of down along the way. Everyone knows the market moves in waves, but somehow they always forget that basic fact when the market is at the top and the bottom of a wave.

Last year people were writing TSLA’s obituary. Now we have other people claiming it will take over the world. Who is right? Easy, neither! Don’t fall for this extreme thinking. In fact, when the extremists take control of the conversations is when we need to be the most afraid.

In the attached chart, you see the five different occasions TSLA stock fell nearly 40% and on three of those, the losses exceeded 50%. Owning a stock that’s tripled over the last few months is great, but don’t mistake serendipity for skill. Remember, if we are in this to make money, the only way we do that is by selling our favorite stocks. While the fools are spending all of their time daydreaming about what they will buy when the stock breaks $1,200, smart money is selling their stock to those greedy dreamers.

As I said in my last post:

Now don’t get me wrong, I’m not calling today a top and I most definitely wouldn’t short something just because it is “too high”. But I do know for certain at some point soon this stock is going to come crashing back to earth and anyone who is patient will be able to buy all the TSLA they want at lower prices.

That is even more true today than it was last week. But feel free to ignore me because without a doubt “this time is different”.

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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $TSLA

Jan 31

How to trade days like this

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis

The following is a brief excerpt from today’s premium analysis that I emailed to subscribers at lunchtime today. This does a good job of explaining how we should respond during sessions like this.

Market Mentor

We always knew this retreat could happen and it shouldn’t surprise us. I liked the mid-week resilience, but that was no guarantee this situation was resolved. But as long as we included this possibility in our trading plan, it won’t catch us off guard and we will respond to it intelligently.

This intelligent and thoughtful response is miles away from the way most people have been trading this situation. Rather than buy early in the rebound when they could keep a sensible stop close to their entry point, they waited until it looked like things were safe and jumped in at much higher levels. Now the market tumbled under their entry points and their positions are in the red. What felt safe at the time turned out to be anything but.  Now many of those same late-buyers are having second thoughts and dumping their stocks for a loss today.

While today’s retreat proves my initial purchase wrong, having a sensible purchase point [near Monday’s lows], appropriate position size [1/3 position], and nearby stop-loss [under Monday’s lows] means any resulting losses will be trivial.

Today’s lows undercut my stops, meaning I’m not out of the market. But rather than give up, I’m already looking for the next opportunity to get in. If today’s weakness proves to be fleeting and is a false alarm, I’ll buy back in and try again. While these whipsaws can be frustrating, the protection against bigger losses while still maintaining the opportunity to profit from the rebound is more than worth it. As long as we are smart about our entries and stops, we won’t lose much from these swings and will be ready to profit from the inevitable rebound.

(All of that said, if the market has an absolutely horrid close this afternoon, I might be tempted to buy a small position just before the close. The lower we go now, the less room we have to fall on Monday, so any selling today actually reduces the risk of holding over the weekend. This definitely counts as trying to catch a falling knife, but if we do it with a reasonable position size, it can be more entertaining than dangerous.)

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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

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