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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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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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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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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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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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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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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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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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