Tech Stocks Lose Bite, Fast Food Craving Grows
Within the first hour of trading today, the Dow was down by as much as 700 points, the S&P down by 2%, and the Nasdaq down 2.25%.
Things didn’t get better as the Dow fell by more than 900 points by midday and only slightly recovered some of the earlier losses. The Dow would close the session for its worst day since September, and overall the three major indices sold off heavily.
Retail traders again found themselves searching for potential setups that wouldn’t get rolled by the plunging market that reacted to negative economic news this week and heightened fears of recession.
Traders shy away from weakening tech stocks
Surrounded by the chaos that is the current stock market, where can traders look for individual stocks showing potential for profitable plays?
First, consider that maybe it’s time to give up a technology stock diet.
During the pandemic and to start this year, FAANG stocks were all the rage. Traders feasted on these stocks which had produced profits on a consistent basis. John Carter, founder of Simpler Trading, made millions off technology stocks.
FAANG stocks refer to high valuation technology companies that are significant players in all three major indexes and include Facebook parent META Platforms, Inc., Amazon.com, Inc., Apple, Inc., Netflix, Inc., and Google parent Alphabet, Inc. This group has lost its years-long luster amidst higher inflation and worldwide economic struggles.
As FAANG stocks lost their bite, retail traders began to sour on these once darling stocks as 2022 progressed. For example, bellwether stock Apple is down by 23% this year and Meta is down 65%.
Plans for switching to diet of fast food stocks
With the hunger for technology stocks dwindling, Simpler’s traders have found a craving for fast food.
These tasty tickers include the likes of tickers like McDonald’s Corp. (MCD), Chipotle Mexican Grill, Inc. (CMG), and Wingstop, Inc. (WING).
The attraction to fast food stocks comes from technical chart analysis based on the Simpler Trading trading recipe where the main ingredient is the squeeze indicator. This is the indicator Simpler’s traders rely on no matter how the market is moving, but particularly in persistent volatility.
“If markets are going to chop, 80 percent of the time we try to find the moments in time where they are going to be trending based off squeezes,” said Henry Gambell, Senior Managing Director of Options Trading at Simpler Trading.
Overall the market was squeezed today like a half-empty ketchup packet.
In the market today, the Nasdaq nosedived for a 3.23% loss, falling to 10,810.53 points. The S&P 500 followed with a 2.49% loss, dropping to 3,895.75 points. The Dow closed out the losing day at 33,202.22 points to fall 2.25% (dropping 765.13 points on the day).
In the middle of stock market losses, how do traders develop a craving for fast food stocks?
As an example, Henry reviewed the monthly MCD chart, which this week showed a squeeze where momentum has two bars of shifting action. This follows the stock hitting a new lifetime high last month.
“From the monthly point of view we are heading from lower left to upper right on the chart,” Henry said. “These are the types of charts where I’m looking to buy with those squeeze signals. There is a lot that could happen inside of a monthly bar.”
Will fast food stocks be palatable for retail traders as the stock market plows through its latest gap down?
Like all aspects of trading, traders must determine what setups work for them based on their personalized trading plan. Follow Henry and his plans for trading through the end of year.
Fast food may just pass traders’ taste tests for opportunities into the New Year.