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May 19

How to stay ahead of this market volatility, plus a stress free way to trade Bitcoin

Free After-Hours Analysis:

It’s been a bumpy couple of weeks and that theme continued Wednesday morning as the S&P 500 retested mid-4k support. But the other important theme also continued, and that’s every scary dip finds a bottom and bounces within days, if not hours.

Taken together, this week’s tumble combined with Wednesday’s strong recovery gave both bulls and bears something to crow about.

While the market thus far appears inclined to bounce off of 4,050, odds are that level won’t withstand another test.

Do we fall under 4,050 support? At this point, chances are pretty good. But most likely that 3rd dip will turn out to be the charm and the resulting bounce will be the real one.

But can I say that with 100% conviction? No, of course not. And that means I include flexibility in my trading plan.

I’m buying these bounces, but I’m also ready to pull the plug if they don’t work out. Just because the first or second bounce doesn’t work doesn’t mean I will give up. As I said, often these things don’t work until the third time.

And if the third time doesn’t work, no big deal, I get out and try again.

Selling the dip early and buying the bounce early is the best way to stay ahead of this volatility. Unfortunately, most people get their ass handed to them because they get out late and get in late.

Trade proactively, not reactively and you will come to enjoy this volatility, not fear it.

The wild ride continues in Bitcoin. But if a person was savvy and had stops near $60k, or even $50k, today’s huge collapse to $30k would have been a fantastic buying opportunity, not a reason to panic.

Plan your trade and trade your plan. Life becomes so much more pleasant once you learn to trade this, p way.

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May 18

What Tuesday’s dreadful close is telling us, plus the most important thing all #Bitcoin owners should do

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Tuesday started off well enough for the S&P 500 with the index hovering near Monday’s close. The index bounced back decisively from last week’s tumble and everything looked great. Unfortunately, the situation deteriorated Tuesday afternoon as the index tumbled 0.76% in a waterfall selloff into the close.

While I was quite pleased with how resilient the market was acting all the way up until lunchtime, this late selloff is a big red flag. As I often write, it isn’t how we start but how we finish that matters most. This rebound gave way to second thoughts and maybe last week’s selloff isn’t done.

It all comes down to Wednesday. With emotion and volatility ramping up, the market is going to make a big move, we just don’t know which direction yet.

I’m fine with a gap lower at the open, as long as the selling stalls and prices bounce not long after regular trade starts. Dipping at the open and closing in the green would be another big win for bulls and confirms this is a resilient market, not a weak one.

But no matter where we open (up, down, or flat), if the selling resumes Wednesday morning and continues into the afternoon, last week’s lows are vulnerable and at risk of being undercut.

We cannot count the bull market out just yet, but we need Tuesday’s weak close to bounce on Wednesday. Any continuation of the late selling will quickly spiral out of control.

As for how to trade this:

If a person has cash, a weak open that bounces is buyable.

Any open that devolves into another wave of selling is shortable with a stop just above those early highs.

For a person with existing positions and nearby stops, don’t automatically sell a weak open. Wait 10 to 15 minutes before pulling the plug to see if that early weakness turns around. If the market bounces, those early lows then become our new stops.

Once we get past 15 minutes, any dip that undercuts our stops is a clear signal to get out and reassess.

Remember, it is far easier to buy back in than it is to wish the market higher if we hold too long.

Bitcoin is at a critical juncture. Either prices bounce off of this $40k test of support. Or the selling violates support and this cryptocurrency gets hit by another big wave of selling.

Right or wrong, this is a sentiment trade it doesn’t really matter what the future holds, only what the crowd thinks will happen. Bitcoin is prone to large swings and this 30% tumble from the highs could early turn into 60% in the blink of an eye.

While a lot of people wish they took profits at $60k, there is a good chance people could be wishing they took profits at $40k. Don’t be one of them. Pick a stop-loss and stick to it.

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May 17

Why complacency is not killing this bull market, plus the biggest risk to #Bitcoin

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped modestly following Monday’s open, but fortunately, it found good support near 4,150 and eventually closed near the intraday highs.

Monday ultimately finished a quarter of a percent in the red, but more importantly, this price action looked more supportive than anything else. The majority of last week’s bounce remains intact and the index is holding comfortably above 4,120 support.

Unsustainable bounces tend to fizzle and retreat quickly. Holding support and trading more sideways than down this afternoon shows most owners are not looking for the exits and would rather hold for higher prices.

As I said previously, selling begets selling and any break in the selling pressure allows most owners to keep holding. Another sideways to up day on Tuesday and last week’s dip will be old news.

As complacent as this market feels, the thing to remember about complacent markets is they last a long, long time before the inevitable fall. At this point, I don’t see anything that suggests we are on the verge of collapse. In fact, these resilient bounces tell much of the opposite. If there is one thing we know for certain about weak markets, they don’t keep setting record highs.

On the downside, the one thing that would make me cautious is retreating back under 4,120 and retesting last week’s lows so soon after bouncing off of these levels. Barring that, the only thing to do is keep holding for higher prices and lifting our stops when this starts making new highs.

It was an ugly weekend for Bitcoin, with the cryptocurrency retreating back to the lower $40k’s following Musk’s criticism last week.

While Bitcoin has always been the gold standard of cryptocurrencies, being the original of the breed also means it is the most flawed in terms of execution. Many alt-coins have tried to address Bitcoin’s shortcomings but they never matched the mainstream adoption of Bitcoin.

With Elon turning his billion-watt spotlight on Bitcoin mining’s inefficient use of energy, that could easily increase calls for a more efficient coin. Like Myspace and BlackBerry, often the first widely popular version is not the one that wins in the end.

Right or wrong, it doesn’t matter what the future holds for Bitcoin, only what the crowd thinks the future is at this very moment. If sentiment flips on Bitcoin, prices could fall a good long way before finding support since the next obvious levels under $40k all the way back at $30k and $20k.

If this falls under $40k, there is no reason to keep holding. Remember, it is far easier to buy back in following a bounce than beg the market to go back to a level you wish you sold at.

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May 14

Is the dip already over?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 kicked off the week with three dreadful sessions, but things got better in the second half after the index strung together a couple of winners and erased a big chunk of those early losses. By the time it was all said and done, the index only gave up 1.4% this week.

Two steps forward, one step back. Everyone knows this is how markets work, yet they always seem to forget this simple fact during every bout of selling.

The typical pattern for this bull market has been bouncing within a day or two, but this week’s selling turned into the first string of three losses since early March. But just when things felt their most hopeless, the selling capitulated and prices bounced decisively off of Wednesday’s closing lows.

As I reminded readers Thursday:

What is the best way to approach these situations? Well, for nimble traders this is easy, treat every bounce as if it is the real deal. Start small, get in early, keep a nearby stop, and only add to a trade that is working.

Anyone that followed this simple plan is back in the market and already sitting on some tidy profits. And not only that, there is enough margin that they can lift their stops to their entry point, giving themselves a free trade.

Is the dip already over? It sure looks like it. Unsustainable bounces fizzle and retreat quickly, often within hours. Instead, this bounce stretched across two full days and pushed the index back above prior support at 4,1200. Two days of non-stop dip-buying tell me there is a lot of money supporting this rebound.

As is usually the case, if a person waited for confirmation, they missed almost all of the profit opportunity. And not only that, by buying late, they expose themselves to the risk of a near-term dip.

The best way to trade this week was selling the dip early and buying the bounce early. Do that and you are ahead of the game. Unfortunately, most people listen to their gut and end up selling late and getting back in late. Those traders are left wondering why their account acts like it has a hole in the bottom of it. (Because it does!)

Approach the market proactively, not reactively and you will forever be better for it.

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May 13

The savvy way to trade the index’s rebound, plus the biggest risk to #Bitcoin

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Q: What’s the best way to make money in the market?

A: Buy when other people are scared.

Following three dreadful days of selling, the S&P 500 was poised for a bounce.

While this rebound provided much-needed relief, the question on everyone’s mind is if this was the real bounce or just another false alarm on our way lower.

Was Thursday’s bounce the real deal? Maybe…but probably not. The problem is we won’t know until after it is over and by then it will be too late to trade it. That means to make money, we have to act with imperfect information.

What is the best way to approach these situations? Well, for nimble traders this is easy, treat every bounce as if it is the real deal. Start small, get in early, keep a nearby stop, and only add to a trade that is working.

If the bottom is already in, great, we bought early and added more as this rebound climbed back to the highs. That means we are already in the perfect position to profit from this bounce. (You were following the rally higher with a trailing stop and moved to cash when this selloff started, right?)

If this is not the real bounce, well, we got in early and placed our stops near Wednesday’s lows or Tuesday’s open. If prices retreat, we get out and try again the next time. No big deal. In fact, a deeper selloff is actually preferred because it gives us even more room to make money buying the next bounce. So here’s to hoping this bounce fails and the discounts get even bigger!

In reality, the third bounce seems to be the most likely to work, but I don’t want to be caught sitting on my hands if this time it’s the first bounce.

Stay nimble and be ready to buy when other people are too scared. If that means we buy one or two dips too early, no big deal. We get out and try again the next time. The important thing is we are in the perfect position to profit from the real rebound.

Elon shocked cryptocurrency investors Wednesday night when he announced TSLA would no longer accept bitcoin payments. This was a big blow because TSLA’s buying into bitcoin was a big component of the rally from $40k to $60k.

Even more concerning than if a bitcoin millionaire can buy his newest electric car using his favorite cryptocurrency is the reason Musk pulled the plug on this bitcoin experiment. It’s because he doesn’t like the amount of energy bitcoin mining uses and its impact on global warming.

This is an often overlooked aspect of cryptocurrencies and Elon shining his billion-watt spotlight on bitcoin’s energy usage could cause long-term ramifications. If this turns into a wider movement, we could see the herd move away from bitcoin and toward a more energy-efficient cryptocurrency. This green shift wouldn’t surprise me in the least.

As I said previously, a prudent trader was to waiting for bitcoin to break above $60k before adding new money. Now that prices have retreated under $50k, this is just another example of why it is often better to be a little late than a lot early.

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May 12

Why Bulls should be cheering this weakness, plus what will signal the bottom

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Selling begets selling, that’s been the overriding theme for the S&P 500 this week. After closing at record highs last Friday, it’s been all downhill since then.

But as I reminded subscribers earlier today:

Before we panic and head for our bomb shelters, a dip back to 4k only amounts to a 5% pullback, something that happens once or twice a year during normal bull markets. While this feels awful and it could get even worse, this is still fairly routine behavior for a bull market.

The problem with impulsive selling is there is no way to predict how far is too far until it is over. What could have bounced off of 4,120 didn’t. How much lower we go before capitulating is anyone’s guess, but at this point, 4k is very much on the table.

As bad as things look, I remain optimistic. Bull markets dip and bounce countless times, but they die only once. From a statistical standpoint, this is almost certainly nothing more than another wobble on our way higher. But just because the odds are on our side doesn’t mean we blindly hold this dip.

As I’ve been saying all along, in addition to holding for higher prices, we also need to be following this rally by raising our trailing stops. If a person stuck to this plan, they locked in profits nearly 100-points higher and are in a great position to take advantage of this dip.

Just because we remain optimistic doesn’t prevent us from taking advantage of trading opportunities like this. This is almost certainly a buyable dip, but remember, we cannot buy the dip if we don’t have cash.

The Achille’s Heel for this market continues to be weakness in the FAANG stocks and today was no different. After a promising bounce Tuesday, these best-of-the-best stocks resumed letting us down today. While these stocks are leading us lower, most likely they will also be the ones to pull us out of this nosedive. Look for a bounce in these stocks to be the signal that the worst has passed us by. The first bounce in these stocks failed. And maybe the second one will too. But don’t give up, often the third time is the charm.

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May 11

Why there is still hope for the bull market. Plus, what’s up with the FAANG stocks?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

It’s been a rough week for the S&P 500 as it shed more than 80 points over the first two days.

The index closed at record highs on Friday but by Tuesday it was already retesting 4,120 support. And so goes the swinging pendulum of sentiment.

There are only two ways this plays out. Either this is the start of the end. Or this is just another routine wobble on our way higher.

So far we haven’t seen any meaningful technical damage telling us “this time is different”. The index gapped near 4,120 support at open and traded mostly sideways for the remainder of the day.

While Tuesday finished deep in the red, more important is the selling didn’t accelerate following the opening gap. That tells us most owners chose not to pile on the weakness and instead, shrugged and kept holding their favorite stocks. This rally has been built on the unshakable confidence of owners and Tuesday’s dip didn’t change that. Most owners would prefer to keep holding for higher prices and as long as we avoid the waterfall selloff, expect them to keep holding.

And this gives us the tipping point for this market. Remain above 4,120 and most owners will continue shrugging off these inflation headlines and will keep holding for higher prices. But fall under 4,120 and the real second-guessing will start.

At this point, we still have to give the edge to the bulls. A trend is far more likely to continue than reverse. And let’s not forget, we are only two sessions removed from yet another record high. Weak markets do many things, but setting record highs is not one of them.

Monday was a dreadful day for the FAANG stocks as they went into freefall. Fortunately, Tuesday turned out much better, even going as far as being good for these best-of-the-best stocks.

As I wrote previously, these critical stocks have been underperforming the indexes and that persistent weakness threatened the entire bull market. Yet Tuesday was a stark turning point with most of these stocks producing nice gains or at least finishing well off their early lows on an otherwise dreadful day for the indexes.

If these tech highfliers lead us lower, it makes sense to reason that they could also be the spark that pulls us out of this funk. If these stocks have another good day Wednesday, the worst could already be over for both these stocks and the entire market.

That said, there are no guarantees and if these leading stocks retreat under recent lows, expect them to continue pressuring the entire market.

Tuesday was a really good day, but we need these stocks to confirm this reversal in fortune on Wednesday or Thursday.

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May 10

How to trade the S&P 500’s latest wobble, plus what the FAANG stocks are telling us

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Monday started off well enough for the S&P 500 with the index opening near Friday’s record close. Unfortunately, second thoughts overcame traders later in the afternoon and those pushed the index under 4,200 by the close.

Is the top already in? Bears certainly think so. Of course, they’ve been saying the same thing for the last several hundred points so we take everything they say with a huge pile of salt. But like a broken clock, eventually, they will be right. Could this be that time? Without a doubt yes…but in reality, probably not.

The key levels for this market are 4,200 on the upside and 4,120 on the downside. Get back above 4,200 Tuesday and all is forgiven and forgotten. Fall under 4,120 and last week’s bounce is dead and the bears might be on to something.

How do we trade this? Easy, keep holding until our stops get hit. And even if our stops haven’t been hit, there is nothing wrong with lightening up a little until this gets back above 4,200. It is always easier to think more clearly with a partial position and the reduced threat of loss.

While it is tempting to hold through a small dip, the inconvenience of trading around a whipsaw definitely beats the discomfort of holding a through “small dip” that turns out a lot bigger than expected.

But as has been the case all year long, if we get out, always be ready to get back in if/when this wobble proves to be yet another false alarm. Just ask all the people that failed to get back in following the dips at 3,300, 3,500, and 3,700.

This market is buyable above 4,200 and shortable under 4,120. Plan your next trade accordingly.

While the S&P 500’s 1% loss felt uncomfortable, that was quaint compared to the bloodbath taking place in the FAANG stocks. The best FAANG stocks, AAPL and GOOG, “only” lost 2.6%. The rest shed between 3% and 4%. Ouch!

While I’m not overly concerned with the S&P 500’s price action (yet!), the FAANG stocks are a different story. And unfortunately for the broad market, losing the best-of-the-best stocks is enough to take everything else down.

I’m giving the S&P 500 the benefit of the doubt but if this FAANG underperformance continues this week, it is time to get defensive and all bets are off.

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May 07

Why this bull market just won’t quit, plus what Cryptocurrency history tells us is coming next

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

After a few weeks of flirting with 4,200, the S&P 500 finally smashed through this psychological barrier Friday.

The monthly employment report missed expectations by a country mile Friday morning, but not only did the shockingly poor employment fail to spook the investors, it caused them to flood in and start bidding up prices.

As paradoxical as this seems, this remains a stimulus-fueled bull market and lethargic employment promises to keep the government spigots flowing at full speed.

No doubt there will be consequences for all of this money printing, but that is a problem for another day. Today, let the good times roll.

Stick with what has been working and that is holding for higher prices. As I wrote Monday following a modest bounce :

[T]his mixed day still favors the bulls. If this rally was truly overvalued and fragile, Friday’s selling would have accelerated, not stalled and bounced. Until we see a more compelling warning, keep holding for higher prices and lifting our trailing stops.

More than 100 points later and this is still as true now as it was then.

There is an interesting divergence developing in the Crypto markets. Until recently, Bitcoin was the only place to be. Bitcoin surged from under $10k late last year to more than $60k earlier this year, leaving all of the altcoins for dead. But then a switch flipped as Bitcoin stalled near $60k and all of the copycats started popping, including the most famous meme coin, Dogecoin.

This resurgence of the altcoins has set off a treasure hunt as speculators chase the next Dogecoin.

The problem for Bitcoin (and all the other cryptos) is this rapidly widening net is diluting the money available to drive any individual crypto higher.

Those of us that have been doing this for more than a few months remember Bitcoin’s last peak back in 2017. Coincidentally enough, that top coincided with a similar explosion of altcoins. Fewer dollars chasing more coins means less demand for each individual coin. Less demand = lower prices.

Will this flood of altcoins end any differently? Only time will tell, but only a fool believes “this time is different”.

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May 06

Why bulls control this market, plus what’s next for $NFLX

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday was a good session for the S&P 500 with the index reclaiming 4,200 resistance.

Two days ago it looked like the market was breaking down, today it looks like everything is under control. And so goes the swinging pendulum of sentiment.

But this shouldn’t surprise readers of this blog. As I wrote Tuesday:

As bad as this felt midday [Tuesday], the close was robust and showed most institutional investors are not taking profits and still holding for higher prices. How we finish always matters more than how we start and despite [Tuesday’s] red close, this qualifies as a good finish.

Two days later and the index is back near the highs. Blink during these dips and you’ll miss it!

The trend is higher and that gives the advantage to the bulls. Bears are the ones who have to prove something changed and they definitely didn’t get the job done this week.

Bouncing off of support and returning to the highs shows bulls are still in control. Keep doing what has been working, which is holding for higher prices and lifting our trailing stops.

This bull market will die like all of the others that came before it, but this is not that day.

As well as the index has been trading, TSLA appears to be stuck in the mud.

The stock slipped under $700 support on Monday and it has been unable to reclaim this key support level ever since.

TSLA has been underperforming the index all year and that trend continued Thursday as the stock finished in the red on a good day for the rest of the market.

At this point, it looks like the stock is headed back to $600 support. And if that doesn’t hold, then there is a lot of clear air down to $400.

Traders with with profits should be looking to protect them and aggressive traders can short this stock with a stop just above $700.

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May 05

What a half-full/half-empty day means for the indexes, plus the next $NFLX trade

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis

Wednesday morning the S&P 500 continued Tuesday’s bounce off of 4,120 support, at least initially. Unfortunately, after erasing nearly all of the previous day’s decline in midday trade, the index retreated back to breakeven by the close.

This was definitely one of those half-full, half-empty kinds of days. Bulls are pointing to the stalled selloff and bears are gloating over the weak close.

In situations like this, the tie-breaker always goes with the trend. This is still very much a bull market and that means when everything is equal, the next move typically resolves to the upside.

Tuesday’s dip and bounce gave us a clear line in the sand. Remain above 4,120 support and the bounce is alive and well. Retreat back to support so soon after bouncing off of it and lower prices are ahead. Plan your next trade accordingly.

As expected, NFLX violated $500 support, giving us a nice short entry.

Stocks bounce from oversold levels quickly. Unfortunately, NFLX has been hovering near $500 for a few weeks now. That tells us this pullback following disappointing subscriber growth hasn’t reached oversold levels yet. Something that holds next to support for too long will inevitably violate that support. And that’s exactly what NFLX did today.

NFLX is now a short with a stop just above $500.

That said, trading against the trend is one of the most difficult ways to make money because it requires impeccable timing. This is a good short entry, but we need to remain nimble. Keep a nearby stop and be prepared to take profits quickly. NFLX is still a great company and this dip will bounce hard and fast once it reaches capitulation. Don’t get caught on the wrong side of that bounce.

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May 04

Why Tuesday’s dip isn’t what bears think, plus the safest way to approach Dogecoin

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Tuesday was a rocky session for the S&P 500 with the index shedding 60-points intraday. But by the time it was all said and done, the index recovered half of those losses before the close.

As calm as things have been, a return of volatility definitely got people’s attention. But as dramatic as Tuesday felt, it really wasn’t that big of a deal. The index briefly tested the lows from three weeks ago before bouncing. If the bears were are looking to break this bull, they need to do a lot better than a modest test of lows so recent, if they were milk, they’d still be drinkable.

As bad as this felt midday, the close was robust and showed most institutional investors are not taking profits and still holding for higher prices. How we finish always matters more than how we start and despite the red close, this qualifies as a good finish.

These midday lows gave us our new stop levels and the index is ownable as long as it remains above 4,120.

If this dip crossed your stops (like it did mine), we have no choice but to get out. But just because the market dumped us out doesn’t mean we have to give up on this trade.

Most dips are false alarms and that means we always need to be looking for an opportunity to get back in. Sometimes we are lucky and the dip carries on for a bit, allowing us to get in at much lower levels.

Other times we are not as lucky and the bounce is quick, leaving us chasing our tails. But at the end of the day, I always prefer an annoying whipsaw over stubbornly holding through a far more damaging correction.

Savvy traders are willing to take small losses when it allows them to avoid larger ones.

Edit: Corrected to reference Tuesday

Three weeks ago I wrote the following about Dogecoin:

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.

Dogecoin has doubled since then, yet nothing has changed about how I’m approaching this. This trade is a ton of fun. But if a person doesn’t have a plan to take profits, they will end up giving all of this back and then some. Don’t be the fool left holding the bag.

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May 03

What Monday’s feeble bounce means for the index, plus a word of warning for $GME holders

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

On Monday, the S&P 500 bounced back from Friday’s dip and recovered 0.27%.

While this green day seems positive enough, bears will point to the index’s inability to hang on to the psychologically significant 4,200 level. The opening strength fizzled and the index ultimately closed nearly the daily lows. That makes this price action “a green day with an asterisk”.

As is usually the case, there are no clear and obvious bullish or bearish trading signals. That would make this easy and as everyone knows trading is anything but easy.

As speculators, we live in a world of shades of gray. Monday was bullish in that Friday’s modest dip didn’t continue. And the resulting bounce had hints of bearishness since the index couldn’t hang on to the early highs. That gives us a mixed bag with both sides having something to crow about.

While this price action seems like a tie, in these situations, we always give the benefit of the doubt to the trend. When all things are equal, we stick with what has been working.

In this case, this mixed day still favors the bulls. If this rally was truly overvalued and fragile, Friday’s selling would have accelerated, not stalled and bounced.

Until we see a more compelling warning, keep holding for higher prices and lifting our trailing stops.

While GME has faded from the headlines, the stock price remains stubbornly high.

The problem for GME bulls is this was always a momentum story. Unfortunately, the public has forgotten about this trade and as a result, momentum has vanished.

That said, this stock is still ridiculously valued (a $20 stock selling for $162). And that means the selloff still has a long, long way to go.

The bounce back to $200 was a fun ride and produced a quick buck for nimble traders. But the subsequent retreat has given us another lower-high and the downtrend is still very much intact.

This party is over and anyone still holding out for $1,000 is deluding themselves. If a person has profits, take them. If a person is stilling on losses, chalk the lesson up as experience and sell while prices are still high. There will always be other trading opportunities (as long as we still have money left to trade!)

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Apr 30

Why “do-nothing” is bullish for stocks, plus how a false-alarm in $TSLA gave us a great trade

By Jani Ziedins | End of Day Analysis

Free Weekly Analysis:

It was another do-nothing week for the S&P 500 with the index finishing almost exactly where it started. Combined with the previous week, the market moved exactly 0.11% over the last ten trading sessions. But for a bull market with plenty of reasons to fall, flat is a meaningful accomplishment.

Absurd valuations. Rising interest rates. Inflationary money printing. Looming tax hikes. Pick your poison. Yet this rally continues defying the skeptics.

Rather than argue with this market, smart money is going along for the ride. Don’t fight what is working and keep holding for higher prices. Leave your stops in the mid 4,100s and see where this goes. And if we get stopped out next week, guess what? You can always get back in when conditions warrant it.

Selling doesn’t mean we have to give up on a trade. Ask ask all the people who got left on the sidelines following November’s, February’s, and March’s dips. Think they are kicking themselves for not jumping aboard the rebound?

Stay safe by always respecting your stops, but never be afraid to buy the next bounce even if it happens a few hours later.

A market that refuses to go down will eventually go up and odds are really good we haven’t seen the top of this bull market.

TSLA retreated under $700 support this week and for many people, that meant locking in some profits defensively. But as is often the case, the dip proved to be a false alarm and prices bounce back above $700 Friday.

While a lot of people feel foolish buying back in after selling a false alarm, the only other alternative is holding a larger pullback all the way down to the bottom. Personally, I know which “mistake” I’d rather make.

As for TSLA’s latest violation and rebound, this was an excellent opportunity to start a new trade. Buy the bounce and leave a stop just under support. While chances are good this bounce won’t stick, with such a clear entry point and sensible nearby stop, the risk/reward is skewed heavily in our favor.

$700 remains a critical level. Hold above support and everything is good. Fall under and it is time to get defensive (and an aggressive trader can short the violation).

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Apr 29

Why the cynics keep getting this market wrong, plus what to do with “too high” $FB, $GOOG, and $AMZN

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

After a few do-nothing sessions in the first half of the week, the S&P 500 made up for it on Thursday by traversing nearly 80-points intraday in a dramatic whipsaw.

The index gapped above the psychologically significant 4,200 at the open. But rather than embrace the breakout, it was met by waves of profit-taking as some investors developed a fear of heights.

All too often people try to top-tick the market by guessing which point is finally too high. Unfortunately for them, too-high almost always turns into even-higher. And not long after the profit-taking knocked the index back under 4,200 Thursday morning, supply dried up and confident dip buyers pushed the index back to record highs.

Higher interest rates. Higher taxes. It doesn’t matter what the bears throw at this market, nothing can take it down. While this nirvana cannot last forever and stocks will falter at some point, this is not that point.

By reversing an early selloff and closing near the daily highs, this rally proved it is still alive and well. Ignore all the talk about too-high and stick with what has been working. Hold for higher prices and keep lifting our trailing stops.

The cynics will eventually be right, but they will be wrong for a long time before it happens.

FB and GOOGL had blowout earnings and not to be left out, AMZN joined the blowout earnings party. These are the best-of-the-best companies in our economy and it is no surprise they are roaring back to life as the economy recovers.

So much for fear of expensive, overbought, and every other cynical criticism thrown at these stocks. These companies keep doing what they are good at and it is little wonder their stock prices keep going up.

While this latest pop makes them even more expensive, high almost always gets even higher. Stick with what has been working and no doubt in a few weeks and months, people will be kicking themselves for not buying at these levels.

That said, don’t hold anything with blind devotion. Pick sensible stops and if these stocks falter, get out. Easy as that. Until then, keep holding for higher prices.

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Apr 28

What we should do with a do-nothing week, plus what $FB and $GOOGL have in-store for us

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

This is quickly turning into a do-nothing week for the S&P 500 with each day amounting to little more than a tenth of a percent swing in either direction.

As anti-climatic as this benign trade feels, stability is not a bad thing. Remember, boring markets are bullish markets. Free from outside pressures, almost all stock owners would prefer holding for higher prices and that is exactly what they are doing here.

While this feels like watching paint dry, it could be worse. And in fact, it will get worse soon enough. Enjoy these easy days while they last because increased volatility is just around the corner. We don’t know what will cause the next drop or when it will happen, but it always comes eventually, often when we least expect it.

Until then, a market that refuses to go down will eventually go up. While the going is slow, as long as we keep getting more up than down, everything is going according to plan.

Don’t fight what is working. Keep holding for higher prices as long as the market remains above our stops.

FB and GOOGL are riding the wave of aggressive ad buying higher. As bad as this economy looked 12 months ago, businesses are confident and in fact, the biggest problem most them have is making enough product to satisfy demand. These industry-leading ad platforms are near all-time highs and expect high to keep getting even higher.

And if the FAANG stocks get their mojo back, expect them to lead the entire market higher.

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Apr 27

Should bulls be worried about sideways? Plus how to deal with $TSLA’s dip

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Tuesday was another sideways session for the S&P 500. But for a market as “overpriced” as this one, anything that’s not down is actually constructive.

High and keeps getting higher; that’s the theme since the November elections. While everyone knows this cannot last forever, a trend is far more likely to continue than reverse.

While I’ve been cautious since the 4k breakout, last week’s dip was the perfect bearish setup. If this market was fragile and vulnerable to a collapse, there was more than enough to send stocks into a tailspin. Instead, most owners kept holding for higher prices and the selling stalled nearly as soon as it got started.

Conventional wisdom tells us to fear complacent markets. What most prognosticators leave out is periods of complacency last a long, long time. No doubt the cynics will be right…eventually, but they will be wrong for a long time before that happens.

This market is trading well and there is no reason to fight what is working. Keep holding for higher prices with stops spread across the lower 4,100s. The market will tell us when it is getting ready to pull back, and this is not that time.

TSLA posted all kinds of records in its latest earnings report. But in a stock whose P/E includes a comma, new records are not good enough. Investors were disappointed and the stock skidded more than 4%, resting just above the critically important $700 level.

Bounce off of $700 and all is the good times keep rolling. Fall under $700 and that risks triggering a larger wave of profit-taking.

With as much air as there is underneath this stock, it could get ugly if momentum escaping. Violate support and I’d much rather lock in my profits than hold this one all the way down.

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Apr 26

Why the index keeps going up, plus how to trade $TSLA’s bounce

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Monday modestly higher and it eeked out another record close.

The index got within a few points of the psychologically significant 4,200 level. We long since passed meaningful resistance levels because virtually everyone holding stocks is sitting on a pile of profits. That means we don’t have conventional overhead supply coming from regretful sellers looking to get out at breakeven.

Instead, we are stuck with hesitant buyers who regret not buying at lower levels. Chase or be left behind is the torment of anyone sitting in cash. But so far, most buyers are keeping their cool and not chasing prices higher with reckless abandon. That more thoughtful approach is leading to this methodical grind higher.

As long as bearish headlines cannot take us down, the only direction left is up. While this rally cannot last forever, or even much longer for that matter, it is acting well enough right now to earn our continued support.

Maybe the rally will stall after cresting 4,200, but so far it isn’t giving any warning signs. We will evaluate the market’s behavior after the 4,200 breakout when (if) it happens.

This rally will run out of steam at some point, but this is not that point. Until then, stick with what has been working and that is holding for higher prices. (And following this rally higher with a trailing stop.)

TSLA is consolidating above $700 support/resistance.

This is turning into one of those half-full or half-empty situations depending on your outlook. Either this is resting before the next push higher, or it is stalling before the next leg lower.

Fortunately, as opportunistic traders, we don’t come to this with an agenda we need to justify and instead are trading this based on what the stock does next.

Ignore the rabid fandom and buy the bounce or short the breakdown. It doesn’t get any more straightforward than that. $700 is the line in the sand. The stock is ownable above this level and it is shortable under it.

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Apr 23

A bullish weekly loss for the indexes and a trade so bad it is getting good

By Jani Ziedins | End of Day Analysis

Free Weekly Analysis:

The S&P 500 finished last week in the red, snapping a four-week winning streak.

That said, retreating a barely noticeable 0.13% doesn’t count as a meaningful loss. In fact, this dip ended up being highly constructive for the index.

Everyone knows stocks cannot go up every single day and periodic down days (and weeks) are inevitable. As is usually the case, how we finish counts a lot more than how we start. Stocks slipped on Monday and Wednesday’s mid-week bounce fizzled and retreated. But when it mattered, the index rallied decisively on Friday and closed within a whisper of all-time highs.

This strong close turned a weekly loss into a very bullish development. As I often write, something that refuses to go down will eventually go up. If the bears couldn’t kill the bull market this week with the wind at their back, chances are good they won’t be any more successful next week.

Stick with what has been working, which is holding for higher prices with stops under the weekly lows near 4,120.

Far less constructive was COIN‘s post-IPO trading. After last week’s eye-popping initial pricing, the stock has retreated six of the last seven trading sessions and finds itself down 32% from the frenzied IPO highs.

But that’s the way this usually goes. The more hyped the IPO is, the bigger bust it turns out to be. (I will dig into the psychology behind this phenomenon another time. That said, it is fairly intuitive if you think about it.)

That said, COIN might be getting so bad it is starting to looking good. Now, this is nothing more than a short-term trade, but this stock is on the verge of bouncing hard. If not Monday, then over the next few days. Buy the bounce with a stop under the lows and be ready to take profits quickly.

As for investing in this stock, if a person is patient and waits a few more weeks, prices will get even more attractive.

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Apr 22

Is Biden’s tax increase going to kill this bull market? Plus the best time to buy Bitcoin.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday was a dramatic session for the S&P 500. The day started off well enough when a small opening dip bounced back to breakeven. But not long after, the flood gates opened the index tumbled nearly 60 points in an hour.

If you believe the headlines, traders were blindsided by reports Biden plans on doubling the capital gains tax. Right or wrong, that was enough to trigger a cascade of reflexive selling. But as ugly as things looked midday, the weekly lows near 4,120 provided rock-solid support.

Will 4,120 support continue holding on Friday? While there are no guarantees, there is a good chance this knee-jerk selling already came and went.

If anyone is surprised a Democratic president is going to raise taxes on the rich, I have a bridge to sell them. This is old news and anyone that feared president Biden’s tax agenda sold way back in November. Investors still holding stocks under a Democrat-controlled Washington D.C. are clearly not worried about these things.

While today’s reflexive selling put on a good show, don’t expect it to add up to much because higher taxes is old news. This bull market got to these levels because of the unprecedented money printing. As long as nothing threatens the flow of stimulus, then the rally is still on.

That said, never underestimate a spooked herd of selling fools. If prices undercut 4,120 on Friday, step out of the way and let the knee-jerk continue. But someone else’s loss can turn into our gain if we are willing to step in a few hours later and buy the bounce. And that’s only if we get lucky enough for the panic selling to continue Friday morning. Most likely, the worst has already passed.

Hold above 4,120. Sell if prices retreat under 4,120 and be ready to buy the bounce even if it is only hours later.

It’s been a rough few days for Bitcoin. The cryptocurrency is down more than 20% from last week’s record highs. While the initial $60k breakout was buyable, this subsequent fizzle was a clear signal to get out. As I wrote earlier:

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.

While it seems obvious now, everyone had the opportunity to sell when this fell back to $60k. While fortune favors the bold, that doesn’t include holding speculative investments all the way down. Remember, it is far easier to buy back in following a false alarm than it is to plead a stubborn trade higher. (Selling at a higher level is always better than wishing you sold at a higher level.)

As for what comes next, Bitcoin is in no man’s land between $40k support and $60k resistance. A bounce back above $60k is buyable as is a bounce off of $40k support. But in between these two trading signals, this is a wait-and-see.

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What’s a good trade worth to you?
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