Uncertain Market Calls For Strategic Pivots For Gains
Traders navigating this wild market can draw some strategy lessons from the world of sports.
Take football for instance. Gridiron strategists might turn a punter into a scrambling running back, use a giant offensive lineman as a fullback, or swing the quarterback out wide as a receiver to catch a pass from a receiver lined up under center.
The analogy is this: the market often forces traders to use the same tools in different ways to score a win.
When technology stocks kick and fight in a downward trend, traders get antsy about their existing setups. Traders need to ask, “Where does the stock lie in the exponential moving average? Is it below the 200 EMA?” If so, the stock is still in the bearish hemisphere and isn’t going anywhere it hasn’t gone before.
The indices can also help with a change in strategy if needed.
Whether the index is the NASDAQ, S&P 500, Dow, or Russell, is this current market the time to buy long or short-the-rip? When traders see a rally in a bearish or a neutral market, they can take a look at the indices to help determine whether to buy or sell — whether they’ll be passing the ball or running a receiver’s route.
Answering questions about movement in stocks or the indices begins with the market structure – price movement along with support and resistance levels. As an asset price action moves from bullish to bearish or neutral, the market structure begins to form. The support and resistance levels hold… until they don’t.
When a rallying stock has a momentum that is bearish, traders could consider that a rip higher can be shorted into the repeated wave pattern. Watch for repeated up-and-down patterns from stock price movements. Traders can also predict stock movement based on investor sentiment – positive or sour.
The market has been in a bearish mood since late January. When key stocks in the market have a rally that doesn’t budge the indices, this could be the time to look at shorting the price actions. Make sure to add a strong dose of caution when shorting any aspect of the market. Consider some extra training and insight before taking on such risk.
Whether making a long trade in a bullish market or shorting a rip in a bearish one, it’s essentially the same ball game played from a different angle. When the charts reveal signals aligned with market movement, this is the time for Simpler’s traders to change up the play calling and go for the win.