The markets still look bullish by and large, but they remain tricky to trade due to the prevalence of false breakouts and steep retracements.
We’re also in earnings season, which adds another layer of risk, though again by and large it looks like we’re in for a largely positive crop of announcements.
The big question is how to trade these conditions …
And the simplest answer is this …
IF you’re going to actively trade these conditions, protect your profits early. It’s almost like, as soon as you get a one-day breakout, raise your stop to breakeven.
Now, that might seem extreme, and it is somewhat extreme. But there have simply been too many false breakouts from perfectly good setups recently, and until that behavior subsides it’s a sensible way to deal with the situation.
Remember, there are three big components to being a great trader:
- Market timing
- Stock selection
- Trade plan
We have (2) and (3) absolutely nailed, and thanks to our professional funds activities we are now able to bring new innovations regarding (1) to you very soon.
We already have the OVIsi, but that is a longer term indicator, most suited to portfolio performance.
I am almost ready to deploy our shorter-term overbought/oversold indicator – hopefully in June. And I have another short term indicator in development for “trend-or-choppy-market” conditions.
The idea behind both of these indicators is to help us optimize our strategy (flags, pullbacks, etc) for the prevailing conditions.
In the meantime we can see that while the S&P and DJ-30 indices have been riding high, for the main part individual stocks have been rising but in a rather challenging fashion.
These new indicators will help us recognize what kind of market conditions we are in, which will help us with our decision-making process.
Again, thanks to all participants of last weekend’s OptionEasy Bootcamp. It really was a great success, and as I mention in this week’s video, from our December Summit onwards my events will now include practical exercises. This is because our software has reached a level of maturity to facilitate this.
So, keep being cautious and picky, and make sure you protect your positions early.