Looking For Market Trends In All The Wrong Places


Simpler Trading Team

Feb 10th 2022  .  3 min read

The U.S. Treasury yields are battling for their place in the limelight, while only a few technology stocks and equities are finding support in this uncertain, bearish market.

So, where is this market headed?

Finding market trends in volatility

Simpler’s traders seek to establish and identify the market trend as they navigate through market volatility.

Many traders find it challenging to trade in choppy markets. It can seem a daunting and confusing environment. Just as surely as traders think everything has worked out, they find themselves asking, “Where did the trend go?”

When looking at price action, Simpler’s traders differentiate between bearish momentum or bearish trend. There are a few key levels that help them know whether to expect an oversold bounce or to short the rip.

Key levels, tools, indicators show trends

As the market continues to move lower at key levels, tools and indicators are available to define and identify trends and levels of support.

Keep in mind, the momentum of this market is bearish overall. But, everything in it is not bearish or choppy. Defensives, such as staples, utilities, dividend kings, and crude oil, are on an inflation trend so they don’t care about chop in the indices. These areas have been resilient against market chop.

By contrast, stalwart semiconductors are even on the downtrend. This mix of stable and unstable movement within the chop demonstrates how some areas of the market are behaving differently from the overall outlook.

Market structure determines trading strategy

Something traders should remember is that structure dictates strategy. After that, strategy determines which indicators traders ultimately use to navigate the movement.

To navigate market environments like this, Simpler’s traders need more than one watchlist. Traders benefit from a dual – or even a triple – watchlist. Finding market, sector, or stock structure before determining the strategy is key. Having a watchlist for each type of trend can help traders make sense of wild and crazy markets.

Traders should consider a bearish watchlist, a bullish watchlist, and a chop watchlist. Categorizing each stock according to its price action enables traders to establish strategy. Whichever market environment we find ourselves in, watchlists enable Simpler’s traders to find “buy-the-dips” and “short-the-rips” setups to make trades in the right direction.

Watchlists can help traders avoid searching for market trends in all the wrong places.

Simpler’s traders know the key in trading is the trend. We can talk about what we “think” may happen, but we ultimately trade what we see in our charts and indicators.