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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:
Monday presented us with another boomerang session as the S&P 500 swung from -1.5% midday losses to finishing up +0.6%.
There were not any new headlines driving this whiplash and instead these gyrations were propelled by the market’s ongoing tug-of-war between bulls and bears.
Fear the collapse or buy the discounts? That’s the million-dollar question.
While lower prices could very easily be ahead of us, the midday bounce off of 4,200 support gave us the perfect bounce entry. No matter how this trade turns out, it will be hard to go wrong buying this bounce. Start small, get in early, keep a nearby bounce and add to a position that’s working.
Anyone following these simple rules is already sitting on a comfortable pile of profits and can move their stops up to their entry points, giving themselves a free trade. Even if the selloff resumes Tuesday, we get out near our entry points, no harm no foul. And if the rebound continues, move our stops up and let those sweet, sweet profits come to us.
While bulls and bears are busy arguing over what’s coming next, I’m over here minding my own business and collecting profits. When it comes to partisanship, I’m an equal opportunity capitalist.
If the rebound continues Tuesday, lift our stops. If the selling resumes, get out near our entry points and wait for the next bounce. Simple as that.
This isn’t my first bounce buy and it probably won’t be my last bounce buy, but as long as I keep getting out near my entry points when these bounces fizzle and fail, I’m in great shape. The most important thing keeping at it so I guarantee I will be standing in the right place at the right time when this thing finally pops. Just like back in mid-March when I caught that 450-point rebound in a 3x ETF and was printing money.
And even if we are falling into a bear market, that’s okay too, because bear markets have the biggest bounces.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
What a difference two days make. The S&P 500 was well on its way to recovering from April’s intermediate step back when the index popped above the 200dma Thursday morning. Unfortunately, that was as good as it got and it was all downhill from there, with the index shedding nearly 250 points by Friday’s close.
To be honest, I really liked Tuesday’s bounce back above 4,400 support and I welcomed that rebound with open arms. Things looked even better Thursday morning following that opening gap higher. It really felt like this trade was firing on all cylinders. Nice!
Then Powell opened his mouth. From that moment on, the index did nothing but skid lower. Aa my dad loved to remind me when I was younger, easy come easy go…
While this late-week reversal sounds painful for a dip buyer like myself, it was actually an easy (and profitable) trade for myself.
By getting in early Tuesday, I was already sitting on a pile of profits by that afternoon and was able to move my stops up to my entry points. Then Thursday’s opening gap allowed me to nudge those stops even higher.
And that’s when the bottom fell out. But that’s not a bad thing. In fact, that’s exactly why we use stops. By that point, my stops were already spread around 4,450.
But the thing to remember is stops are only our last line of defense. There is nothing that says we cannot sell before they get hit. In fact, many trades are obviously broken before our stops get hit. And that was definitely the case with Thursday’s meltdown.
From the moment Powell opened his mouth, the market started skidding and it didn’t stop. That’s not what a good trade looks like. Anyone looking at that chart knew the market was broken and there was no reason to stick around waiting for our stops to get hit. Pull the plug and get out of the way.
Buy the lower 4,400s, sell the upper 4,400s, and watch the carnage from the sidelines. That was the story of my week.
Now that the index crashed through 4,400 support, things get a lot more interesting. Either the selling continues next week or it stalls and bounces.
From the safety of the sidelines, I’m fine with either outcome. If we bounce Monday, great, I’m a buyer. If that bounce doesn’t happen until Tuesday, Wednesday, or Thursday, that’s fine too. In fact, that’s even better because the lower we go now, the more money I make when this bounces back.
Never forget, we cannot buy the bounce if we are fully invested. That means always be willing to pull the plug on trades that are not working.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday was a truly dreadful session for the S&P 500 as an early 1% gain disintegrated into a 1.5% loss. It doesn’t get more ominous than a strong open turning into a weak close.
We can blame this intraday reversal on Powell when he was very direct in saying a 0.5% interest rate hike is coming next month and we should expect more of the same in subsequent months.
It’s been two decades years since the Fed raised rates in half-percent increments and while most investors knew this was possible given our absurd 8% inflationary environment, some people were hoping for a more measured runup in rates.
But to be honest, simply falling back to 4,400 support is not horrible. It was definitely a dramatic reversal, but the bottom hasn’t fallen out from under us…yet.
As bad as Thursday looks on a daily chart, it was actually a very tradable decline for those of us that were paying attention. We started high and then skidded in a methodical way through the day. We weren’t caught off guard by a huge opening gap. There wasn’t a nearly instantaneous selloff. Instead, prices simply ground their way lower. And lucky for us, these slow-motion declines are the easiest to trade because they make it super easy to get out at our stops.
And to be honest, with something as telegraphed as this selloff, there was no reason to wait until our stops got hit. It was fairly obvious early in the session something was wrong. And when a trade isn’t working, there is no reason to ride it all the way back to our stops. Never be afraid of pulling the plug early. Buying back in is a heck of a lot easier than wishing prices would go back to the levels we regret not selling at.
Tuesday was a great buying opportunity and Thursday sent us scrambling for cover. But that’s the way this goes sometimes. If trading was easy, everyone would be rich.
While obnoxious bears will taunt me for being foolish enough to buy Tuesday’s bounce. I got in early Tuesday and then I got out early Thursday. While this bounce didn’t work and I was “obviously wrong”, buying in the lower 4,400s and selling in the upper 4,400s isn’t that bad of a deal. If that’s what being wrong looks like, then I definitely don’t mind being wrong.
And guess what? Now that I’m out, I’m already looking for that next bounce. If I’m lucky, my next trade will be just as “wrong” as this trade.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Wednesday almost exactly where it started.
While flat is not as much fun as up, hanging on to all of Tuesday’s gains was a nice win for bulls.
As I’ve been saying since this latest test of 4,400 support started, real bounces take off and don’t look back. Last week’s failed bounces unwound their gains within hours. While Wednesday’s 24 hours of price stability isn’t enough to hang our hats on just yet, it is already doing better than last week’s fizzles.
As I wrote back on March 29th when the index hit multi-month highs:
Now that we’re at the highest point since the 2022 correction started and within 200 points of all-time highs, we should expect the rate of gains to stall, if not outright retrench in a very normal and healthy step-back. Retesting 4,400 wouldn’t be a surprise.
And wouldn’t you know it, here we are testing 4,400 several weeks later. Funny how that works.
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But rather than freak out and predict a much larger selloff like everyone else, to me, this looks like the “very normal and healthy step-back” I anticipated back in March.
Rather than freak out alongside the crowd, we should be buying these discounts fearful sellers are so graciously giving away.
I have no idea if this is the real bounce or not. But I do know Tuesday’s buys are sitting on a pile of profits and my stops are already above my entry points, making this a free trade. If I’m right, I make a pile of money. If I’m wrong, I get out near my entry points, no harm no foul. Boy do I love it when trades work out like this.
At this point, there is nothing for me to do other than keep holding and moving up my trailing stops. And if I get stopped out, no big deal, I collect some small profits and try again next time. Being “wrong” doesn’t get any better than that.
I could write a book about what’s going on with NFLX, but the Cliff Note’s version is it is setting up for a very tradable dead-cat bounce over the near-term before resuming the long-established down-trend.
Swing traders can buy the next bounce for a quick profit.
Anyone still holding NFLX needs to be looking for an exit because as bad as this looks, it is going to get even worse over the medium-term. Use any bounces as an opportunity to get out.
And for the most aggressive traders, shorting the dead-cat bounce is probably the best trade going here.
As for what comes next, expect a saw-tooth decline with plenty of fool’s bounces on our way down to $140ish over the next six months. From there, expect this to turn into dead money for the next six months as people give up and forget about this stock. And then, and only then, will this finally become buyable for a longer-term hold.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 shot up 1.6% Tuesday, easily retaking 4,400 support and reclaiming even more ground before the closing bell.
Monday’s violation of 4,400 support couldn’t go any further than 4,370 before it ran out of impulsive sellers and bounced. To be honest, that was a pathetic showing by the bears. If that was the best they could do, what are people so worried about? And now that the index is back above 4,400 support, all lights are flashing green.
Is this finally the real bounce? Maybe. Maybe not. But as a nimble trader, I don’t care. I jump aboard these things early and within hours, I was already lifting my stops up to my entry point, giving myself a free trade. If the bounce continues, great, I let those profits pile up. If the bounce fizzles and retreats, no big deal, I get out near my entry point and I get to try again next time. No harm no foul.
While critics claim I’m stupid for buying bounces that are so obviously destined to fail, I don’t mind. Any low-risk trade is worth taking no matter how unlikely it is to work. It’s like I found a pile of lottery tickets. Just because the first three didn’t payout doesn’t mean I give up and throw the rest in the trash. I will keep scratching until I find the one that makes it all worthwhile. And if they are all losers, no big deal, the only thing I lost was my time.
In March, I hit the jackpot, catching that 450-point surge in a 3x ETF. Will the next bounce payout like that? Most likely not. But since I like free money, I’m willing to give it a shot.
Buy the bounce above 4,400. Move stops up to our entry points. And if a person isn’t already fully invested, add more Wednesday if the index continues trading well. And if prices rollover, no big deal, get out near our entry points. Simple as that.
In fact, there is no reason to hold this all the way back to our stops. If this looks broken, then it is broken. Real bounces take off and don’t look back. If this retests support so soon after bouncing, it’s not the real deal. Get out and wait for the next bounce. Remember, buying back in is always easier than wishing stocks will go back to the levels we wish we sold at.
I love buying bounces, but I will never keep holding one that’s stopped working.
NFLX got murdered in after-hours trade after badly missing subscriber growth projections.
Growth stocks are great…until they stop growing. Down 25% after the close. Ouch!
But this is nothing new for NFLX. This stock is already down 50% from last year’s highs. Anyone still holding from those highs is just plain foolish. We only make money when we sell our winners and right now, anyone that bought NFXL over the last few years watched big piles of profits vanish. And worse than that, they let a great trade turn into a big loser.
It is impossible to make money in the market with a strategy like that.
As for nimble traders, I don’t mind buying bounces and Tuesday’s bounce was buyable with a stop under Monday’s lows. But every disciplined trader starts with a small position and lets a trade start working before adding more. While waking up tomorrow to a 25% haircut is painful, it hurts a lot less with a 1/3 or 1/2 position.
As for how to handle NFLX going forward, the stock will probably bounce early Wednesday. Owners can keep holding with a stop under the early lows and try to reclaim some of those losses, but don’t get greedy and be ready to lock in losses later Wednesday or Thursday.
As for opportunistic traders, can buy the bounce with a stop under those early lows.
This bounce will probably fail and if (when) it does, there is no excuse to continue holding under the opening lows. From there, the pain will only get worse.
But don’t take this stock out of your scan. In a few weeks, just when things look their most hopeless, there will be a very large bounce from those grossly oversold levels.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 stumbled into Thursday’s pre-holiday close, finishing the session under the all-important 4,400 support level.
Thursday’s dip wasn’t a make-or-break moment for the index, but it did reveal demand isn’t ready to power the next leg higher…yet.
It isn’t unusual for investors to be a little gunshy ahead of a three-day weekend. Big money is thinking, “Why take unnecessary risk here when I can just wait until next week to buy?” And given all of the headline uncertainty surrounding us, that cautious approach makes a lot of sense.
As poorly as the index acted Thursday, I don’t read much into holiday-affected sessions. In fact, I think the market could be setting up for a nice bounce next week. Slip to 4,350, squeeze out the last of the weak danglers, and then pop back above 4,400 support. (capitulation bottom) To my eye, that would be the perfect setup for a buyable entry.
Will we get it? Maybe. But there are no guarantees in the market and that is why I bailed on Wednesday’s bounce when the market retreated under my entry points.
While it feels like buying a failed bounce is a waste of time, getting out at the level I got in means the market gave me a free lottery ticket. If the bounce worked, great, I made money. If the bounce failed like it did, no big deal, I got out at my entry price and it didn’t cost me anything.
That’s about as good of a risk/reward as a person could ask for. (My favorite “bad” trades are when the bounce is a little bigger before fizzling and I actually make a profit by being “wrong”.)
Anyway, I’m out and looking to buy a bounce back above 4,400 support next week. (Start small, get in early, keep a nearby stop, and only add to a trade that is working.)
Maybe it happens, maybe it doesn’t. But either way, my trading plan is ready for the next opportunity.
If you find these posts useful, please return the favor by liking and sharing them!
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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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