Avoid ‘Marrying’ Trades In Frigid February

2021-02-23

Will the February seasonal weakness get worse?

In Texas there is a saying, “wait a few hours and the weather will change.” (Granted, the recent winter vortex took several days.)

In this stock market, seasonal weakness is a lot like the Texas weather a big storm and then fades back to something more normal.

Tech stocks were ice cold early Tuesday as all three major indexes bled into the red. Then the trading temperature shifted direction as all three indexes warmed significantly into the close.

When the whirlwind session ended, the Dow was positive at 31,537.35 points to rise .05% (adding 15.66 points on the day). The Nasdaq dropped to 13,465.20 points for a .50% slip while the S&P 500 bounced back to rise .13% to 3,881.35 points.

What is notable about today is that, still, too many traders have not adapted to the shifting seasonal weakness and a market that moves hard and fast.

Key stocks ones traders loved just a few weeks ago now are not looking strong.

Tuesday’s session showed how easily traders can be stopped out with painful losses.

Some are asking if this cycle of weakness is a buying opportunity into a rally…

Others worry it’s just the beginning of a larger flush...

What’s the plan?

Simpler’s traders are trading in shorter time frames. This is a trader’s market that fits a “buy the dips, sell the rips” strategy vs. “buy and hold” of old.

Going forward Simpler’s traders are looking for strength across the board and in key stocks while cautious of more selling.

With this weakness Simpler’s traders are seeking entries should a bottom with support hold. Until then the plan includes staying hedged and even “sitting on your hands” to determine how the market shifts.

With this seasonal weakness there is no desire to be “married to a position.” Such commitment can get icy and dicey.

We Saw: Cold, hot cycle of seasonal weakness — 

  • Market’s tender nerves as Fed speaks
  • Sharp daily reversal into close in “trader’s market”
  • Fed inflation tensions appeased… for now?

We’re Watching: Hedging while watching for “rip” opportunities —

  • How far Fed sticks its nose into market movement
  • For short-term trade moves and swings
  • Setups in: NFLX, QQQ, SPX, GOOGL