Nov 10

How big will this pullback be? We are about to find out.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Wednesday was another disappointing session for the S&P 500 with the index losing 0.8%, adding to Tuesday’s 0.3% decline.

While this 1% slip from record highs isn’t a big deal by itself, the bigger worry is this is the start of something even larger.

The size and speed of gains since October’s lows was shocking to say the least. As I often write, markets love symmetry and something that goes up too much tends to fall too far in the subsequent pullback. It is only fair to ask if we are on the verge of that next pullback.

Only time will tell, but that’s the problem, we won’t know until after it happens. All too often, traders wait until the market moves against them before selling. But what’s the point in selling after a big chunk of our profits have already evaporated? Why not sell before the pain of regret forces us out?

That’s why I like trading with trailing stops so much. They take these decisions out of my hands and I don’t have to worry about “what if?” When my trading plan tells me it is time to get out, I sell. Easy as that. And guess what, if prices bounce an hour later, it isn’t hard to buy back in.

Only inexperienced traders try to pick tops. Unfortunately, that approach leads to an emotional attachment to that position because no one likes admitting they are wrong. But guess what? Trading is hard and we are wrong a lot, like a lot.

Those of us that have been doing this for a while are more than happy to sit back and simply follow the market’s lead. I don’t care if this goes up or down. All I care about is that I’m in the right place at the right time.

As I wrote Tuesday:

There is nothing wrong with locking in some very healthy profits following such a big run. We only make money when we sell our winners and this is as good of a time as any to harvest some of those well-earned gains. Sometimes all it takes is a little profit in our pockets to help us look at the market more clearly and sleep better at night.

And that’s exactly what I did. I started locking in profits Tuesday and Wednesday when prices started retreating. I still have some money in the market and will be ready to jump back in with what I sold if prices find a bottom and bounce. But if the selling continues, I’m out and waiting for the next bounce.

Odds are good I sold unnecessarily the index will be back at the highs soon enough, but I don’t mind. The inconvenience is cheap insurance against holding through a much larger decline.

If you find these posts useful, please return the favor by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Nov 09

Dark clouds over the indexes and a bad call in TSLA turns into a pile of profits

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.35% Wednesday, but this isn’t a bad performance if a person is focused on the half-full side of the glass.

The index has been up nearly every day since mid-October and down days here and there are perfectly normal for any bull market. In fact, I would actually feel more comfortable if October’s rebound had several more down days mixed in.

And that’s the crux of our problem. As good as the run from the October lows has been for our trading accounts, maybe it’s been a little too good. Markets love symmetry and a rally that goes too high is almost always followed by a pullback that goes too far.

No doubt we have a date with “too far” in our near future, the question is if Tuesday’s weakness was the start of the next pullback to support.

That said, anyone betting against this bull market lost a lot of money. The same goes for anyone that chickened out and sold too early. The trick, as always, is not overreacting to a little weakness the same way those critics and cynics have been doing all year long.

As I’ve said previously, the most critical and telltale sign of every market pullback is prices actually pulling back! Today we got a little selling. Is this enough to break the dam? Or will this bout of weakness turn out just as fleeting as all of the other dips that came before? Only time will tell. The best we can do is prepare for all eventualities and let the market decide our next step.

Lucky for us, as independent traders, we can be both patient and nimble. If this market wants to sell off, we get out at our stops and wait for the next bounce. If this is nothing more than another minor wobble on our way higher, we keep holding for higher prices. And if the market wants to whipsaw us, we can handle that too as long as we are willing to jump aboard the next bounce (even if it comes a few hours later).

And as I wrote Monday, there is nothing wrong with locking in some very healthy profits following such a big run. We only make money when we sell our winners and this is as good of a time as any to harvest some of those well-earned gains. Sometimes all it takes is a little profit in our pockets to help us look at the market more clearly and sleep better at night.

The pullback is coming. If didn’t start Tuesday, it will start soon. Make sure your trading plan is ready.


Monday I said TSLA looked good and owners had nothing to worry about. Tuesday the stock plunged 12%. Well…that sucks.

Lucky for those of us with a sound trading plan, we got out above $1,100 when the early selling violated Monday’s lows.

As much as we try, we cannot be right all of the time. In fact, do this long enough and we will make so many mistakes we won’t be able to remember all of them. That’s why every savvy trader has an exit plan that protects their backside when they are wrong.

And to be fair to myself, I bought the bounce off of $600 support and locked in some very nice profits above $1,100. Should I really be calling this trade a mistake?

And with TSLA finding support above $1k, it actually makes sense to start putting a little of that money back to work with a stop under this level. The TSLA trade is far from over and just because we sold at our stops doesn’t mean we need to give up on it. If the $1k bounce doesn’t hold, we get out and buy the next bounce.

More important than being right or wrong is being in the right place at the right time and if that means being wrong a few times first, so be it.

If you find these posts useful, please return the favor by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Nov 08

A yellow light for the indexes and a green light for TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis 

The S&P 500 bounced between small gains and losses Monday, ultimately finishing 0.09% in the green.

While 0.09% is ordinarily nothing to write home about, adding to Friday’s flirtation with 4,700 and finally closing above this psychological level is definitely significant.

Such a record close would have been impossible to imagine only a few weeks ago when the index was threatening to crash through 4,300 support. We’ve come a long way since those lows and even more impressive is the incredibly short amount of time it took us to get here.

As scary as these heights feel, the market continues trading well. We’ve been solidly overbought for weeks, yet buyers keep throwing even more money at these record highs.

Monday afternoon saw a small wobble into the red and this counts as test for the market. If this rebound is fragile, all it takes is a small crack to break things wide open. But so far things are holding together. Now, one afternoon doesn’t mean we are in the clear. In fact, what happened Monday is far less important than what’s coming on Tuesday and Wednesday. That said, a good day on Monday is definitely better than a bad day.

If nervous owners start taking profits, that selling could feed on itself and push the index back to 4,600 and even 4,550 is on the table. While a pullback to support is a very normal and healthy thing to do, it would feel jarring given how effortless the climb to these levels has been.

Or buyers could keep throwing money at this market and we’ve only seen the start of the silliness.

At this point, either outcome is likely and trading is simply a matter of waiting for sentiment to tip over. No doubt we are close to the next routine step-back, but the same thing could have been said last week and the week before that.

We trade the market we are given and while this one will eventually consolidate these gains, but it isn’t dipping yet and that’s the way we have to trade it. As scary as this looks, there is nothing to do but keep holding and lifting our stops.

If a person is paranoid, there is nothing wrong with taking some profits off the table. It’s been a great run and we only make money when we sell our winners. Take a portion of your position off the table and let some ride. Sometimes harvesting some profits is all it takes to get a better night’s sleep.

Lift stops to the lower/mid 4,600s and see where this goes.


TSLA tumbled after Twitter told Elon to sell 10% of his TSLA stock. Some owners panicked dumped shares in anticipation of that big overhang of looming supply. That said, the knee-jerk selling was fleeting and prices are quickly bounced above those early lows.

There are lots of reasons to sell this stock, but Elon selling a fraction of his holdings is not one of them. While an academic with his pocket protector and calculator will tell us one thing, given this stock’s absurd valuations, it’s been years since this stock heeded any academic’s advice.

This is a momentum trade and the momentum is still higher. Use this morning’s lows as a stop and anything above this level is holdable/buyable.

If we get dumped out, no big deal. Be happy to lock in those profits and get ready to buy the next bounce, probably somewhere around $1k.

Of course, the stock might not even sell off and that’s why we continue holding until our trailing stops are hit. (Most nervous owners bailed out hundreds of dollars ago.)

If you find these posts useful, please return the favor by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Nov 01

A smart mistake, a smarter correction, and TSLA to the MOON!

By Jani Ziedins | Free CMU

Free After-Hours Analysis: 

Last Wednesday I slammed the S&P 500 for its dreadful close. Then the index proceeded to show me up by setting three record closes in a row. Funny how that works.

This reversal highlights just how nimble we need to be as traders. We cannot allow ourselves to get hung up on opinions. Even reliable trading signals can lead us astray. (An impossibly high accuracy rate of 80% is still wrong one out of five times!)

Now don’t get me wrong, I’m not suggesting taking risk off the table last Wednesday afternoon was a mistake. In fact, it was the only sensible decision to make. But just because we took risk off the table last Wednesday doesn’t preclude us from adding that money back in Thursday morning when the worst failed to materialize and prices bounced back.

I took my lump Thursday morning and I’m better for it. And even though I lost some money in the exchange, I’m more than happy to pay a small price now to avoid a bigger loss later. Remember, this isn’t about getting every trade right. It is about making more money than we lose. Sometimes that means taking small losses and I’m always fine with that as long as it allows me to be in the right spot at the right time when the big moves happen.

This is also a good opportunity to talk about position sizes. While a lot of people think in binary terms and move all-in and all-out of the market, that often is an expensive approach that magnifies mistakes and compounds regret.

I like moving in partial positions. Start with a quarter, third, or even half position. Only add more if that initial trade is working. If you are wrong, you only lost money on a partial position.

And even more advantageous, this risk management strategy allows us to be even more aggressive with our initial trades. We no longer need to wait for confirmation. Instead, we jump on the first hints of a selloff or bounce. I sold 1/3 last Wednesday afternoon and I bought 1/3 back Thursday morning. While my ego was a little bruised, my trading account hardly missed a beat.


TSLA is positively on fire. Good thing readers of this blog have been hanging on since the $600 bounce off of support and have been moving up their stops up ever since.

This price action is getting downright silly but it usually does with these extreme highfliers. Impossibly high gets even higher and that’s definitely the case with TSLA. As I wrote last week:

Now don’t get me wrong, I am most definitely not a TSLA bull and this looks as sustainable as all those dot-com names back in 2000. But I’m a trader and it doesn’t matter to me where this stock will be five years from now. If it is going up today, I want to be aboard and enjoying the ride. We can worry about all of that other stuff when it eventually becomes an issue. Until then, “don’t worry, be happy.”

Well, last week’s $1k breakout turned into $1,200 Monday and who knows what Tuesday holds. No doubt this will get really ugly at some point, but until then, keep holding for higher prices and lifting our stops. Stick to this simple strategy and we will be sitting on a pile of cash when everyone else is wondering what happened to all of their amazing profits. (Remember, we only make money when we sell!)

If you find these posts useful, please return the favor by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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