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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:
Thursday’s session got off to a rocky start after MSFT issued a revenue warning. That was enough to push the S&P 500 into the red for the third day in a row.
But as I often write, how we finish is far more important than how we start. And by that measure, Thursday turned out to be a fantastic session. Over the next several hours, the index surged 100 points, not only pulling itself out of that early hole but also erasing all of Tuesday’s and Wednesday’s losses, leaving us at the highest levels in nearly a month.
While headlines continue to be overwhelmingly negative and suggest lower stock prices, after two months of living under these storm clouds, it seems like we finally ran out of fearful owners willing to sell a retelling of those same old headlines.
No matter what the headlines are, eventually we reach a point where we exhaust the supply of sellers and that’s when those headlines stop mattering, ie the bad news gets priced in. A spike in oil prices. The Fed promising two more half-point hikes this summer. Inflation weighing on corporate earnings. It’s all a slightly different version of what we’ve been hearing for months.
As bad as things seem on the surface, we always reach a point where the market goes too far and prices bounce back despite the headlines. It took a while, but it seems like we finally passed that near-term capitulation point.
At this point, 4,300 is still very much on the table. Maybe this ultimately turns out to be nothing more than a dead-cat bounce on our way lower. But the near-term trend is decisively higher and that makes this a very buyable bounce.
Follow the headlines and we’d never buy anything. But do this long enough and it becomes obvious that even the most dreadful bear markets have big bounces on their way lower.
I’m not convinced this will be a particularly bad bear market. But even if that’s where we are headed, this is still a great near-term buying opportunity.
If this rebound stalls and retreats Friday or early next week, no problem, I pull the plug at my trailing stops, collect some handy profits and run. But until that happens, this is acting like it still wants to go higher and that means riding this wave as far as it will take me.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 experienced only its second down day out of the last seven trading sessions on Tuesday. Not bad for a market that many people had written off as dead.
A 350-point rebound over a handful of sessions is downright impressive, but my readers always knew this was coming. As I wrote in last week’s free post titled, “Why smart money is buying this bounce“:
As bad as every stock chart looks right now, that is exactly why we should be prepared for a near-term bounce. Everyone knows markets move in waves, yet most people forget this simple fact in the heat of battle. While a 70-year losing streak is impressive, savvy traders are anticipating a vicious snapback, not another seven weeks of selling.
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While no one is excited about Tuesday’s 0.6% giveback, everyone knows we cannot go up every single day and down days are part of every move higher.
More important than one day’s plus or minus is how the market responded to the first meaningful bit of selling in a week. And if we look under Tuesday’s hood, the early wave of selling stalled and bounced from those early lows. That is the kind of price action I like to see from down days.
As I wrote last week, I bought the bounce and my stops are already well above my entry points. There is nothing for me to do here other than keep holding for higher prices and lifting my trailing stops.
Maybe bears are right and this bounce fails and heads back to the lows, but at this point, I’m already sitting on a nice pile of profits in my 3x ETF trade and it doesn’t matter to me. Keep going higher and I make even more money. Stumble back to the lows and I lock in some nice profits at my stops and get ready to buy the next bounce.
Buying early means I’m protected no matter what happens next. But at this point, it looks like this market wants to keep heading higher and 4,300 resistance is very much on the menu.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 started the week off well enough, notching a 1.9% gain following the longest weekly losing streak in 70 years.
As bad as every stock chart looks right now, that is exactly why we should be prepared for a near-term bounce. Everyone knows markets move in waves, yet most people forget this simple fact in the heat of battle. While a 70-year losing streak is impressive, savvy traders are anticipating a vicious snapback, not another seven weeks of selling.
As I’ve been warning readers, the market likes to go where people are looking and 3,840 was a widely followed level simply because that represents a 20% pullback from January’s highs. Well, as luck would have it, Friday’s session touched the magical -20%. But rather than trigger a follow-on wave of reactionary selling, supply dried up and prices bounced nicely into the close. Funny how that works.
As much as I expect lower prices over the medium-term, Friday’s late rebound was the perfect invitation to jump aboard a near-term bounce that could travel as high as 4,300 resistance. 400 points of upside is nothing to sneeze at!
This is the trade we’ve been waiting for and hopefully, most readers were able to take advantage of it. Buy Friday’s late bounce, add more Monday morning, and move stops up to our entry points. It doesn’t get much more straightforward than that.
Hundreds of points of potential upside and by getting in early, we already have a nice profit cushion and next to no downside. Trades don’t get any better than this.
If the bounce fizzles, we get out near our entry points, no harm no foul. If the rebound continues to 4,300, we make a pile of money. Gotta love that risk/reward!
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If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
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