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By Jani Ziedins | End of Day Analysis
My Trading Diary
The S&P 500 tumbled for a second day, but the losses were relatively mild as compared to recent volatility. Nothing wrong with a little give back following a strong move over the last few weeks. That said, I was feeling defensive and yesterday’s mediocre close convinced me to take profits in 1/3 of my position. No doubt this was premature, but I had profits and I didn’t want to let them get away. Plus I still have 1/3 left and will benefit if prices rebound. And as I often write, I can always get back in.
I still feel good about the medium-term prospects, but we could test the 50dma and 2,950 over the next few days. That would be a normal and healthy thing to do. Or maybe this morning’s dip is as far as we go. Either way, this market wants to go higher, not lower and every dip is a buying opportunity.
My Trading Plan
Most Likely Next Move: A little cool down that will bounce soon. If the bottom isn’t already in, look for a bounce near 2,950ish.
My Trading Plan: Took some profits yesterday, but already looking to get back in if we close well.
If I’m Wrong: Prices undercut 2,950 and that triggers a tidal wave of defensive selling. But as long as we stick to our stops, then all that dip is is another profit opportunity.
By Jani Ziedins | End of Day Analysis
A free excerpt from today’s Premium Analysis:
Market Mentor
Tuesday morning’s gains launched us above the psychologically significant 2,900 level and prices are within 100-points of all-time highs. People who sold last week’s headlines are now having second thoughts, and that’s the way this game goes. Traders who make the most money are the ones that trade proactively, not react reflexively to what everyone else is doing.
There is a very important difference between selling because your preplanned stop was hit and selling because you are scared things will get worse. Just like there is a difference between holding because that is what your trading plan said you would do and holding because you are hoping that the market will bounce at any moment. Pros trade their plans, amateurs trade their gut.
While there is no guarantee a trading plan will produce a profit in any single trade, following a solid trading plan definitely guarantees better odds for success over the long run. Always plan your trades. That includes when to buy, when to sell defensively, and when to take profits. Just as important, anytime we get flushed out for a loss, don’t get discouraged because the next buying opportunity could be hours away.
At the moment, the market is buyable as long as we hold 2,900 support. The opening gap made it a little more risky to buy because a sensible stop under 2,900 is a little further away. But we can manage that larger risk by trading smaller. Start small and add more after the position starts working.
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What’s a good trade worth to you?
How about avoiding a loss?
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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM
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