Market down? Take a vacation!
I used to trade stocks no matter what the general market was doing — and I suffered heavily for it.
That’s because stocks follow the general market at a ratio of 4 to 1.
Did I know this? No. Did I believe this? No.
So I’d be trying to go long no matter what — and all around me the market would be tanking. And I’d be scratching my head wondering why all of my breakouts weren’t working.
Trading like that is no fun.
So I don’t do it.
For better or worse, at the moment, my gauge for the general market is the 50 day moving average. If $SPY is above the 50 MA I am good to go. If we’re below it, watchoutnow!
Do we crash every time we dip below the 50 MA?
No.
And that’s the thing about the market — every time doesn’t exist.
The best we can do is find guideposts that we use to let ourselves know what could happen. For me, that guidepost is the 50 period MA.
So I will be sitting next week out to see what happens.
Why sitting out — and not going short? Because, for the most part, I’m not the best shorts seller. And in the market it pays to know your strengths.
If we do head down for any length of time, you can bet I will be looking to trade the short side, or go long inverse etfs. But for now — sitting out.
Still, I did look at individual stocks to see if anything was setting up. Believe it or not, I did find a couple trades. I’m going to highlight these below — for my own education.
Looking for a move to .68 here.
Looking for a huge follow through here after this huge day.
Looking for a return to the uptrend and a target of $2.00.
Sneakout here -- looking for a pop to $4.00.
TZA is an inverse ETF. It goes up when the market goes down. This trade is called a hedge!
As I said, I’m not trading these positions. But I will be taking notes to create a record of trades under the 50 MA.
Good luck out there this week
This post was written by...
David John Hall – who has written 200 posts
David has been trading non-stop for 6 years. He lives in Redondo Beach, California (an awesome place to live) and is super stoked to be able to blog about his passion here.
I just started trading myself and look forward to your insight.Keep up the good work and thanks a lot.
Thanks Gordon. I’ve been trading about 6 years now and I’m still learning something new nearly everyday. Good luck to you!
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