Mar 09

Did you buy the bounce? If not, why not?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 rebounded decisively Wednesday, adding 2.6% after oil prices pulled back from recent highs.

A month ago no one would have believed stocks would rally because oil was selling for $109/bbl, but that’s the world we find ourselves in.

Markets always take things too far, especially when emotion gets involved. That means it was inevitable this latest spike in energy prices was going to overdo it. And at least to this point, it appears like Tuesday’s run to $130/bbl was a bit too far and prices have since moderated from those overbought levels.

Maybe $130 was the capitulation point and things get better from here. Or maybe this is just a temporary reprieve before the next push to $140. Unfortunately, we won’t know until after it happens.

While some people try to guess the answers ahead of time, successful traders follow the market’s lead, especially when it comes to wildly emotional and unpredictable moves like these.

While $130/bbl is definitely unsustainable, that doesn’t mean prices cannot hit $140 or even $150 before falling back to a more appropriate level.

While I have opinions, I’ve been doing this long enough to know better than to trade those opinions. Instead, I follow the market’s lead and Wednesday the market was telling me to buy the bounce. Start small, get in early, keep a nearby stop, and only add to a trade that is working.

If prices continue higher Thursday, great, I will add more. If the bounce stalls and retreats, no big deal, I get out near my entry points and try again next time.

Maybe this is the real bounce. Maybe it is another false bottom on our way lower. Either way, my trading plan has me covered. Buy the bounce, sell the breakdown, and repeat as many times as necessary.

The next big bounce is coming and it will leave a lot of people behind. Luckily, I won’t be one of them. (If the selloff continues for a few more days or weeks, even better, I watch the carnage from the sidelines and swoop in and grab even bigger discounts when the next bounce finally arrives.)

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

Mar 08

Why smart money was buying Tuesday’s midday rally

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Tuesday was another turbulent session for the S&P 500 as the index swung between 50 point gains and losses. Unfortunately, bears won the day and the index closed at the lowest levels since last summer.

The price action appeared encouraging after Biden announced a ban on Russian oil imports and the index surged 120 points from the early lows. That midday resilience went against what most people were expecting and unexpected strength is typically a really good sign. But that contrarian move proved short-lived and the index quickly gave back all of those gains and then some by the close.

While this extreme volatility is unnerving a lot of traders, the market doesn’t need to be scary if we come prepared with a sound trading plan.

As I’ve been saying since the start of the year, sell the dips and buy the bounces. While that sounds blindingly obvious, most people end up doing the exact opposite and that is why so many people struggle to make money.

As I wrote yesterday, I locked in profits last week when the previous bounce hit its head on 4,400 and undercut my trailing stops. That means I’ve been looking for the next buyable bounce ever since.

Tuesday’s midday bounce looked good, really good, and so I pulled the trigger on a partial position. (Start small, get in early, keep a nearby stop, and only add to a trade that is working.) When the rebound kept going, I  moved my stops up to my entry point, giving myself, in effect, a free trade. At that point, no matter what happened during the rest of the session, I was covered.

And as luck would have it, the selling resumed and I got dumped out near my entry point. Boooo!

While cynics laugh when people buy bounces that don’t work, I look at this as a free lottery ticket. If it works, I make 200 or 400 points when prices bounce back near recent highs. If the trade doesn’t work, I’m out at my entry point, losing nothing. 400 points of upside with virtually no downside? Only a fool ridicules that trade. (And lucky for us, the market is filled with fools. If it wasn’t, it wouldn’t be nearly this easy to make money.)

While Tuesday’s bounce didn’t work and I’m back in cash, I will be back at it again on Wednesday. And if that doesn’t work, there is always Thursday.

One of these bounces is going to work and I don’t want to miss 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

Mar 07

The moves to make when bad news spells opportunity

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Monday was a bloody session for the S&P 500 as it shed 3% in the index’s worst performance in nearly a year and a half.

Headlines about inflation and rate hikes have been buried by what’s going on in Ukraine and oil price’s race toward historic highs. That said, there were not really any new developments this weekend and the stock market and oil markets are simply reacting to last week’s events.

Technically, Monday’s tumble leaves the index resting just above 4,200 support. This is the third test of support in recent weeks and unfortunately, while double bottoms are a thing, triple bottoms are not. That means the near-term prognosis for the market is not good. If the latest bounce was going to hold, we wouldn’t be retesting it this soon. So expect more pain over the near term.

That said, don’t expect a huge crash. While another -3%, -5%, or -7% wouldn’t surprise me, any overreaction will bounce hard and fast, returning stocks back near these levels within a week or two. So yes, while the near-term pain will get worse, it will be short-lived.

As long as we know what’s coming, we can plan around it. As nimble traders, there is no reason to hold through even a mild 2% dip and I already bailed out of my latest bounce play last week. Hopefully, you did the same.

Sign up for free email alerts so you don’t miss the next big trading opportunity.

As I have been explaining to readers all year, I buy every bounce and that includes February’s latest bounce off of 4,100. But a nearby stop is ALWAYS part of every purchase, starting under the recent lows and then quickly moved up to my entry point as the bounce continues. And when the bounce keeps going, I keep moving my stops up with it.

While February’s bounce is on the verge of failing, I locked in some worthwhile profits last week and I’m getting ready to buy the next bounce.

Remember, we cannot take advantage of these great trading opportunities if we don’t have cash, and that means selling at higher prices.

Buy the bounce, sell the dip, and repeat as many times as necessary. With big, directional moves like these, making money isn’t hard.

Now that we’re in cash, the firs thing we’re doing is looking for that next bounce. Start small, get in early, keep a nearby stop, and only add to a position that is working. Maybe the bounce comes Tuesday. Maybe it doesn’t happen until Wednesday or even next week, but no matter when it happens, I will be there buying it again with open arms.

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

Feb 28

What if Putin does the unthinkable and how to protect ourselves from it

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

S&P 500 futures fell as much as 2.5% during Monday’s overnight session as Russia’s war with Ukraine continued over the weekend and the West tightened the sanction screws on Russia.

But those overnight losses moderated by the open of regular trade to minus 1.5% and even better, the index finished the day down a very modest 0.2%.

While volatility remains off the chart, the index is trading amazingly well given the start of the largest European invasion since WWII. But as I told readers two weeks ago, this paradoxical behavior was expected:

This phenomenon of uncertainty being worse for stocks than bad news is what allows stocks to actually rally once bullets start flying.

Sign up for free email alerts so you don’t miss the next big trading opportunity

Well, that’s exactly what happened. While this crisis in Ukraine has turned into the worst-case scenario as Russia launched a full-scale invasion, US stocks have actually rallied nearly 7% from Thursday’s open. That’s not what a rational person would expect, but the stock market rarely does what it is supposed to do, so this mindbending move is par for the course.

While it feels a little strange to be profiting off of this conflict in Ukraine and my heart goes out to all of the people affected by this dreadful situation, I’m a trader by nature and when I see a great trade, I cannot help myself.

And given the market’s resilience Monday in the face of escalating economic sanctions, the stock market feels pretty comfortable economically with the way the situation is progressing on the other side of the world. While a massive human tragedy, the impact on US corporate earnings will be limited and is already largely priced into stocks.

As well as the index is acting, there isn’t much to do here except lift our stops to the 4,300 region and see if there is more upside left in this huge bounce.

That said, there is one risk that hasn’t been accounted for in US financial markets and that is Putin getting desperate and using tactical nuclear weapons to beat Ukraine into submission. Flatten one Ukrainian city with tactical nukes and the US stock market will open down 25% or more.

While this scenario seems highly unlikely, that’s the way many people felt about a full invasion early last week. That makes this a good setup for a bifurcated trade. Continue following the indexes higher with a conventional trade but buy a little insurance against the unthinkable by picking up some out of the money puts.

I typically don’t mess with options, but this is one of those cases where they make a lot of sense. The other alternative is staying in cash, but it is hard to resist these profits, so I will continue taking what the market gives me while using stock options to protect my backside against the unthinkable.

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

1 … 78 79 80 81 82 … 261