Playing Long Game To Avoid Market Hysteria

2021-09-14

The market isn’t being kind to traders this week with all three major indexes pulling back from the previous rally higher.

The market has been extended on every measure for some time. Is this the sharp downward shift we’ve been anticipating?

Time will tell, but this week’s selling volatility shows how traders need to adjust to what the market gives.

Simpler’s traders are eyeing stocks that are out there doing their own thing as we look for a solid buy signal. Since some of those signals can be based on mass hysteria in the market, we will be making cautious entries on any ticker with a valid setup. We continue to look for buying the dip opportunities while remaining aware that repeatedly buying struggling stocks that are overextended can backfire. No one yet knows how far this pullback will go.

Looking back to last year, we saw an end of August rally followed by a devastating bleed into October. The bleed may have been delayed into mid-September this year.

This market environment is a time to get back to the basics and dive into the charts. In a drawdown, it’s crucial to remember that “self-talk” and “other-people-talk” are not good for traders. It’s also time to watch out for setups that you can't quickly exit. Right now is when we want high-reward, low-risk plays that don’t put us on the wrong side of the move. And, the market is a lot stronger than you would think, so don’t fight it.

Keep in mind that while the news can have a strong influence on stocks, the trend is still the trend. And for the long haul, this market is — at this point — trending higher.

When waiting in this environment for opportunities to take advantage of a potential run up, this can be a good time to kick some non-producing baggage out of the long-term portfolio. This is a good time to remove some put-credit-spreads from your playbook. Simpler’s traders are also on the lookout for bearish stocks that could lead to shorts.

And, Simpler traders are keeping their eyes on the “honey badger” stocks that don’t care what the indexes are doing. Those are the ones we want to see on our charts.