Wrecking Ball Hits Market, Traders Rebuild

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Simpler Trading Team

Feb 01st 2022  .  2 min read

Wrecking Ball Hits Market, Traders Rebuild

February 1, 2022

Between earnings season and Central Bank announcements, the market looks like it was hit by a wrecking ball. 

Simpler’s traders anticipate volatility and understand that they can find trades in the crazy bounces of a bearish-trending market.

Intraday volatility in the indexes and the market leader stocks offer trading opportunities in an environment that has looked nasty this quarter. Making it even more difficult, the support levels of the overall market have broken all the way down.

This is when Simpler’s traders work to identify where the market will hold, by looking back at the historicals, and then watch for a bounce.

The S&P 500 bounced off the lows and traders started seeing buy programs soon after the uptick. After seeing extreme selling, our traders watch for ticks on the charts that identify buying and selling. An increase in ticks can indicate buying has picked back up.

Stocks that have relative strength become the market leaders, and buyers make a run for those first.

Simpler’s traders use tried-and-true indicators to identify trends and find the market leaders. For example, homebuilding stocks, while they certainly took a pause after news of rising interest rates by the Central Bank, have continued to perform with relative strength.

The answer to rebuilding a trading plan after the market is wrecked is to find areas of support for intraday trades. Support forms when prices do not move lower due to buyer activity.

When Simpler’s traders spot the area where the price will hold, they jump on the strongest and quickest tickers to ride to the upside as long as the momentum holds and until it meets resistance.

Intraday moves in the midst of volatility allow Simpler’s traders to follow the price leaders as the market continues to gap up. If a stock or index provides momentum, then traders can continue to ride that higher.

This earnings season is proving to be volatile, and making long swing trades is risky.

This is the time when Simpler’s traders utilize indicators and methods that work for intraday trades on the market leaders.

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