It is the start of Earnings Season and with this brings the unpredictability of a sudden move. Some traders decide to never hold a trade overnight if earnings are about to be announced on that stock, while other traders live for the volatile movements. These volatile movements can be a great way to lock in profits, but it can also bring about emotional trading.
If you are a trader who likes to hold their positions through earnings, then you HAVE to stick with your trading plan. Often times, the sudden movement that a stock can make after earnings can bring about emotional trading, especially if the move is against your trade. Earnings can also lead to the fear of missing out, in which case, you find yourself chasing the tick for an entry point or management. If your trade all of a sudden moves against you, you may feel the need to take immediate action. If you start to feel any of these panics build up within yourself, remember to take a deep breath and go back to your trading plan. What is the plan you have in place for if this type of movement were to occur? Were you going to manage at a certain price or support/resistance level? Did you build time into the trade? Did you have a stop loss in place? Having a trading plan in place can help calm all the emotional alarms going off and give you the clarity you need to trade your account. As the saying around here goes:
“Don’t be a Dick for the Tick”
Remember to follow a trading plan and don’t let the tick or your emotions take control of your trading.
John — Overall this week showed some toppy action, with sectors like healthcare and transports reverting to the mean while broader indexes tried to hold it together. Flash forward to Friday, and the big three (AMZN, GOOGL and AAPL) had nothing exciting earnings wise to spur the markets to new highs. And in the absence of exciting information, institutions sell. Today’s action in the internals is what you see at the beginnings of a crash. That doesn’t mean we crash – I’m just saying these are the ugliest internals I’ve seen in a long, long time. I do think this sets us up for a test of the weekly mean at 2660 on the ES and 6440 on the NQ. Remember, the markets go down a lot faster than they go up. I’m looking to add to my SPY puts and get more exposure to the downside.
Danielle — This week was quite a whirlwind compared to the last 5 weeks we’ve had in this bull market. The indexes finally gave us the pullback we all knew was coming – we just didn’t know exactly when it would strike. While there were several moments this week where I thought it was another ‘buy the dip’ opportunity, they all proved to be fake outs, and the S&Ps, NQ and Dow took out low after low on Friday. WIth the indexes going out on their lows and high negative $tick readings all day, that does not bode well for the markets on Monday. A normal pullback will take us to the 8 or 21 – and the S&Ps closed below the 34. For Monday, I’m looking for continued downside. For the rest of the week? I’d like to see the indexes hold – above the 34 ema, to take on any new buys. If that doesn’t happen, I’ll remain light and focus on trading futures until the indexes stabilize.
Bruce — Today we witnessed a “slow” flash crash of sorts with weakness across the board. Is this the beginning of something bigger or the end of the selling? No one knows for sure, but for next week I am leaning towards buying vs selling. I don’t think the greatest bull market of all time is over. I think we have simply taken a breather that we all knew was coming. For next week, we will watch the market and see if this turns into more. Stay nimble and light on your number of trades. Have a great weekend.
Raghee — Non Farm Payroll was the big punctuation mark on a week that saw major earnings, the State of the Union, FOMC, and a Super Moon Moon. NFP was the event I was most interested in because it was the best opportunity to sell U.S. dollars against the euro, Canadian dollar, Australian dollar and buy gold. All of which we did in the room Friday. This week also saw the Dow well-off three times it’s daily price movement range and I’ve bought it both times. Today’s YM sell-off has taken the daily chart to the 34 period EMA in the high which is my preferred conservative entry. Naysayers of this equity strength are maybe thinking “this time”… but in reality until there is a real choice for returns, stocks are it. I’ll be watching bonds (the 30-yr) into next week. This is the best clarity the daily time frame has seen in a while. The downtrend is in place as we’re seeing yields in the U.S. and Europe hit highs. Is there a message there? We’ll see next week…
Carolyn — Well it looks like the cycles FINALLY kicked in for at least a deeper pullback than we’ve seen recently. The weekly chart below illustrates the grouping of cycles observed in January for a possible top. The only problem is we won’t know HOW much of a decline will come….Since the larger pattern on the weekly/daily charts is still going to be considered bullish….I have to watch the key areas on the way down for possible termination of this decline. I’ll be updating those every day in my videos….Note that right now, this decline is ONLY similar to prior declines within the larger uptrend……..Therefore a resumption of the rally is not out of the question. Watch for specific levels and decisions on my end of day video updates!
Henry — Today’s action is something I think most traders were looking for. Of course looking for it, timing it and participating can be a little trickier than it sounds, but with stock indexes trading so far away from their daily 21 EMA, we knew to expect a pullback at any time. Thinking more on 2018 thus far, I think there are two primary camps of traders. You either trade with the trend and do like we did in January where most every day was pretty solid, then you give some back on the 60 point ES correction. Then there’s the other camp where you stay short every day, and finally get the correction. For me, there’s only one way to go, and that’s with the trend. As you begin to “master the trade” you can get to a point where you have both going on. Like this morning I was mostly long equities but the hedge in the S&P futures really helped pad the way down for me. It’s not to say everything was perfect, but I play for the 30~ days we’ve seen up this year, and a I knew a day like today was bound to happen. It’s still been an amazing start to the year and as far as I’m concerned we’re just through January and we’ve got 11 fresh months ahead of us. This is the perfect time to get your mind right, and get ready for the next series of downs.
I thought I might share a quote here I posted in the room today also. Helps keep things in perspective. 🙂
“The last of the great human freedoms is the ability to choose one’s own attitude in any circumstance” – Viktor Frankl
David — With another few hours to trade here on Friday, the S&P 500 is approaching the area where I have been looking for support to form for a return to a bull trend. Back above 2797 would be the earliest sign that such a move had begun and so long as we don’t make subsequent new lows after such a move back up, we can look for more upside in the market.
Trade of the Week Update
Henry Gambell says: Unfortunately this trade did not want to cooperate this week. However, I stuck to my trading plan and closed it for a small loss instead of the full loss I would have taken.
See the original setup HERE
Expert: Henry Gambell
Setup: Setup on HOG
Update from Henry: I’ll cover in the video how I could’ve traded HOG a little better. Basically, when the tick gaps against your short puts that bad, I’m usually not going to sit there and try to keep making it work. There is a time to hold a trade and there is time when you need to stick to the trading plan and close out. Following my trading plan helps keep my emotions in check and a clear view of what the chart is showing me.