Don’t look now… but almost 1 out of 3 S&P 500 stocks are in bear market territory. These stocks are 20% or more off their 52-week highs. (Note: If you haven’t watched my video series on cashing in on crashing stocks then watch this).
As the U.S.-China trade war heats up… I’m chomping at the bit to trade these markets…
- Volatility is back. The more volatility, the more trading opportunities we have as options traders to profit.
- It’s a back and forth market. My strategy works in all market conditions, even a choppy stock market like the one we’re in now.
- There are more stocks and ETFs to choose from. In a regular market, only stocks with catalysts move… however, in this market, nearly every stock and sector are in play.
Not only that, but my money pattern works like a charm. For example, despite it being a red day for most stocks yesterday, I still was able to profit from being long calls.
(Few stocks were up yesterday, luckily I was in the right one, if you’re not getting my real-time alerts, click here to change that.)
On May 14th, I told you that my success over this stretch has been attributed to having a balanced portfolio. In other words, some long positions (calls) and some short positions (puts).
That hasn’t changed. However, we’re approaching some critical levels in the SPY. And if these levels get breached…I may be leaning towards a less balanced portfolio.
Read on to find out which way I’m leaning, and what levels you should be watching in the SPY.
Watch Key Levels When You’re Trading
We’re getting a taste of volatility again… and if you don’t know how to navigate when stocks are crashing, make sure to check this out.
The market has been teetering on edge with all the U.S. – China trade war headlines… and it seems like the market is stuck in range.
I’m still focused on the macro view, technical indicators like my money pattern, keeping a balanced portfolio… and looking for longs that have been holding up with this volatility.
Could SPY Break Below the “Death Line”
Now, the SPDR S&P 500 ETF (SPY) – the market barometer is approaching a key level right now, what I call the “Dead Line”. Basically, if it breaks below that… we could see a correction. Here’s a look at the hourly chart I’m looking at.
SPY is just sitting above the $280 level again – the “Death Line” – it’s bounced off that area before… but if it doesn’t bounce off that level again, I think we could see a quick drop in the market.
Not only that, we’ve got some technical indicators turning south. For example, you’ll see my money pattern in the hourly chart above.
Notice how the blue line crossed below the red line. Well, that’s the 13-hourly simple moving average (SMA) crossing below the 30-hourly SMA… and that’s a bearish signal.
Usually, the “buy the dip” herd comes in… but we’ll see what happens as SPY testing that $280 level again.
Now, another indicator I’m watching is recent initial public offerings (IPOs)… typically, in bullish markets, we see hot IPOs trend higher. However, demand has been very soft at these levels, and nearly all of these IPOs are coming off their highs.
For example, tech unicorn Uber Technologies (UBER) actually dropped on its IPO day… and continued to fall… Lyft Inc. (LYFT) fell shortly after… and that’s not a good sign.
However, that doesn’t mean I’m not actively looking for stocks to trade… the key here is to keep a balanced portfolio.
Maintain A Balanced Portfolio
Now, it’s okay to look for specific stocks to trade… but you should look to maintain a balanced portfolio. For example, here’s a look at my current portfolio.
(If you want to live stream my portfolio and watch my moves, click here to get started)
Despite the market being down, I’m still up on the day.
Because my portfolio is directionally biased… in other words, no matter where the market goes, I can make money. Now, if you want to learn how to maintain a balanced portfolio, check out my post here.
Now, you’re probably wondering, “Well Jeff, how do I find trades like that?”
It’s pretty simple actually…
Look for stocks that you like as longs… as well as shorts… (keep in mind I’m trading options here, so if I’m bullish I’m buying calls on the stock… if I’m bearish, I’ll look to buy puts).
For example, I liked Constellation Brands (STZ) as a long… the company is well-managed and it’s in a very defensive space in the market… additionally, I like the technical setup.
Notice how well STZ held up despite all the market volatility.
Not only that, the moving averages held as support. That said, I figured it was a good spot to buy given the relative strength, as STZ was green on the day… while SPY was down over 1%.
Now, if the stock breaks above that upper blue trend line… it could continue running up to $210 or higher. I’m currently long options in STZ… and I’m staying nimble since the market is nearing the death line. I’m looking for a 50%+ move to take profits on half of my position… and hold the rest for 100%+.
Remember, we’re trying to keep a balanced portfolio here… and one trade on the short side I’m looking at is Trade Desk Inc. (TTD).
Here’s a look at the hourly chart.
TTD has been trading in range… however, we saw a bearish crossover on the hourly chart. I’m going to be patient here and let my charts tell me what to do. It seems like the $192 area is holding up well… so I’m not making moves just yet.
Now, I’m going to make sure to alert Weekly Money Multiplier clients about any moves I make in the stocks on my watchlist.
The whole idea is to get into positions that will benefit if the market rises… and positions that should go up if the market goes down. That said, it doesn’t matter where the market goes because your bets will be hedge. In other words, you could make money in either direction.
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