Dec 23

ZM owners need to be careful

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

I love writing analysis when people are making tons of money and everything points to them making even more money. Unfortunately, that’s not the case with ZM and I feel bad writing this, but these things need to be said.

This latest episode of weakness started back in early December when the stock tumbled 15% following robust revenue growth. As I wrote back then:

There are few things more worrying than a stock that falls on good news. That signals unrealistic expectations and once the selling starts, it usually doesn’t stop. The market loves symmetry and rallies that go too high are almost always followed by pullbacks that go too low.

December’s initial breakdown paused near $400 for a few weeks, but as is often the case, when something refuses to bounce, that usually means lower prices are ahead. And today’s 6% tumble was the day. The stock violated $400 support, unleashing a torrent of defensive selling. The stock closed just a hair under recent lows but we should expect this to only get worse from here.

I’d love to be proven wrong and see this stock bounce decisively, but this price action is dreadful and we should be prepared for the worst. If a person still believes in this name, take profits with a plan to jump back in after the stock retakes $400. As I often say, it is better to be a little safe than a lot sorry.

On the other side, this looks like a great short entry with a stop just above $400 support.

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Dec 22

Why AAPL is a strong buy

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Tuesday was a good session for AAPL. The stock popped nearly 3% on a day when the index finished in the red. This strength followed rumors Apple is entering the automotive space (again). These gains adds to last week’s outperformance when the stock popped 5% following reports it was increasing iPhone production.

When things are going right, everything seems to go right and that is the case with AAPL right now. And that’s exactly what I wrote last week:

As I often write, a stock that refuses to go down will eventually go up. That’s definitely the case with AAPL here. After a four month cooling off, this stock is finally ready to make its next move. And given the size of [last] Tuesday’s pop, there is a lot of enthusiasm for this name.

The stock is just shy of its September highs and there is no reason to think it won’t get there. And when it gets there, there is no reason to think it will stop. Instead, expect this to break through the highs and keep going. Sentiment is bullish and that is a powerful force, especially following a five-month consolidation.

Now, that’s not to say this will be a straight line higher or this will occur over the next few days, but momentum is definitely behind this stock and it clearly wants to go higher. Maybe we break the highs next week. Maybe it doesn’t happen until next month. But as long as this remains above $120, all lights are green.

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Dec 21

Is TSLA running into trouble?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Monday was a historic day for TSLA as it officially joined the S&P 500. This addition triggered some wild gyrations Friday afternoon as institutional investors scrambled to get into the stock and it surged 7% in the final moments of the day. Unfortunately, TSLA struggled to hold those gains Monday and it retreated nearly 7%.

A majority of the frantic, index driven buying is already behind us. Investors that needed to buy the stock have mostly already bought it. And speculators that got in ahead of this wave of institutional buying are starting to collect their profits. Tapering demand and accelerating profit-taking threaten to turn this into a very typical sell-the-news trade.

Investors are always looking forward and they make their trades in anticipation of the next big move. Any sensible investor gets in before the move, not after it. That means most of TSLA’s index buying occurred over the last several weeks. Anyone waiting until today to buy the stock is weeks late and hundreds of dollars short.

What comes next? That’s harder to say. This stock is not obeying any sort of logic or reason so we cannot use logic or reason to figure out what comes next. This is a pure momentum play, plain and simple. It will keep going up until it stops, nothing more and nothing less. When that happens is anyone’s guess, but just because we cannot predict the future doesn’t mean we cannot form a sensible trading plan around this stock.

If we know this will keep going up until it stops, that’s a fairly straight forward trading opportunity. We hold the stock with a trailing stop and see where this goes. Buying the bounce off of $400 was a great entry point and now that the stock is above $600, we can place our trailing stop under recent lows. As long as the stock remains above this level, keep holding and see where it goes. If prices retreat, get out and wait to buy the next bounce.

There is nothing more criminal than hitting a home run, only to allow greed to cause us to hold too long and let all of those profits escape. We only make money when we sell our winners and we always need to have a plan to take profits.

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Dec 18

Weekly Analysis: How to respond if volatility picks up next week

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis:

It was another decent week for the S&P 500. The index finished 1.3% higher and it continues grinding its way into record territory.

Stocks are trading well despite the political bickering going on in Washington. Our “leadership” is struggling to agree on a stimulus bill and just as important, a funding bill to avoid a very unhelpful government shutdown. That said, this gamesmanship is S.O.P. for how things get done in D.C. and every agreement looks like it is going down in flames moments before it gets passed.

At this point, the market is trading really well. That said, we are quickly approaching the lull between Christmas and New Year’s. Don’t expect much meaningful to happen over the next two weeks because most big money managers have already left for Florida or Aspen. If these institutional investors wanted to make any portfolio adjustments before year-end, they already did it and we should expect stocks to coast into 2021.

While the gap between Christmas and New Year’s should be quiet, things can get a little choppy when retail investors take control. But even if we see volatility pick up next week, ignore it. These impulsive little traders run out of money quickly and any move they trigger stalls and reverses not long after.

Trading opportunities will definitely get more interesting after the calendar rolls over to 2021. Until then, relax and take a moment to stop and enjoy the holidays. It’s been a great year for trading and we should be very thankful to be as fortunate as we are!

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Dec 17

My 2021 Prediction

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

‘Tis the season for making predictions about next year. While these things are mostly pointless because any number of unknowable things will occur over the next 12 months (can anyone say COVID!), I figured I’d get an early start on mine since the financial press is already bugging me about it.

The funny thing about most of these “forecasts” is they look awfully similar to what happened in the current year. If it was a rough year for stocks, most of these predictions will be very subdued. If it was a great year, expect most pundits to forecast another banner year for stocks.

Unfortunately, the stock market doesn’t work that way. In fact, most of the time the stock market does something entirely different next year. That means a good starting point for predicting next year is eliminating what happened this year from the list of possibilities.

That’s great news because I don’t think anyone could handle another year of pandemic! But more seriously, it was an amazing year for stocks all things considered. In fact, it was a good year for stocks period with YTD gains of 15%. But looking ahead to next year, that means we cross “good year” off the list of possibilities for 2021.

That leaves us with great year, not so good year, bad year, and really bad year. I’m torn between “great year” and “not so good year”. Maybe Covid stops being a concern this spring and everyone goes on a spending spree after having been cooped up for the last 12 months, setting the economy on fire. Or maybe the stubborn 6% unemployment becomes a persistent drag on the economy and we fall into a very conventional recession.

To be honest, I could easily see either scenario play out. And why should we be forced to choose one when we can have both! Therefore, my 2021 prediction is a strong start to the year as we conquer COVID followed by a second-half realization a lot of people are still unemployed and that’s not good for the economy. After producing very respectable midyear gains, I expect stocks to stumble in the back half of the year and finish either flat or slightly negative.

And next year at this time we can come back to this post and laugh at just how wrong I was.

If anyone wants to see what I predicted for 2020, check out this post from last year. Spoiler alert: I failed to predict a health crisis would crush the global economy and stocks would rally to all-time highs as a result.

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Dec 16

How high can Bitcoin go?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis 

Bitcoin is making headlines again, this time for smashing through the old highs. But anyone who’s been reading this blog knew this breakout was coming.

Back in October, I commented on the cryptocurrency’s noteworthy bounce off of $10k support:

I’m not a big fan of virtual currencies by any stretch, but as long as this holds above $10k, it is doing everything it needs to do to earn our respect.

And then a couple of weeks ago when Bitcoin first challenged $19k, I said:

These huge rebounds almost never touch the old high and then simply give up. Even if the bubble eventually bursts, we are going to smash through the old highs before that happens. Maybe the top is $25k or maybe it is $30k. Either way, this latest buying frenzy is far from over.

As I write this, BTC is already $3k higher and pushing toward $22k. So far everything is going according to plan.

I don’t expect this buying frenzy to cool off anytime soon. As I said a few weeks ago, maybe the top is $25k, maybe it is $30k. Or maybe we keep going to $40k. Who knows. But when something moves this fast, the only choice we have is to grab ahold and see how far it goes.

This is a strongly directional move and we can (and should) follow this higher with a trailing stop. Right now $20k is a good level to protect our profits. When prices get up to $25k, we move our stops up again. $30k, ditto.

We let the price-action tell us when it is time to lock-in profits. And if we get stopped out prematurely, no big deal, we just jump back in when the dip proves to be a false alarm.

This is easy money and the only people who will screw it up are the ones that hold too long. Don’t let greed cause you to make that mistake. Come to this with a plan and then follow that plan.

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Dec 15

AAPL is rested and ready to go

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

AAPL popped 5% Tuesday after rumors leaked out the company is increasing iPhone production next year by nearly 30%.

This move breaks the stock out of a four month long consolidation and is the highest the stock’s been since early September.

As I often write, a stock that refuses to go down will eventually go up. That’s definitely the case with AAPL here. After a four month cooling off, this stock is finally ready to make its next move. And given the size of Tuesday’s pop, there is a lot of enthusiasm for this name.

AAPL is buyable as long as it remains above $120 and expect it to challenge the old highs over the next few weeks. And this one won’t just kiss the highs, it will smash through them.

But as always, maintain a sensible stop because there are no guarantees in the market. That said, this one looks as good as it gets.

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