The all-market Santa Rally
Wishing you a very Happy Christmas!
From the depths of Monday’s mini stock crash, Santa got his skates on, woke up and with his three-jabbed helpers rushed down from the North and heaped big presents under the tree (but only for the bulls). Yes, many stocks recovered Monday’s losses and the US indexes are suddenly pushing close to new ATHs. Obviously, that action has nixed my bearish stance earlier.
Yes, we have suddenly reverted back to the Everything Rally where buying the dips is de rigeur.
But I am not at all fazed by my wrong call. No-one can get all their calls right. The difference between failure and success in trading is this – did you lose much or any money on your calls? That is the measure of trading success – not being ‘right’ on a market call.
As any experienced trader/investor knows, you can still lose money even if you called the market direction correctly. For instance, you may get in near a major high and see your positions stopped out for a loss. or you may buy near a high and use no stop and see the market wipe out your account entirely. Last week the Dow dipped by 1,500 points. Anyone buying near the high would have seen a loss of £7,500 on just a small £5 bet. How many traders could stand that?
One of the great benefits of being a member of my VIP Traders Club is that any trader can protect him/her self from major losses – the fate of many inexperienced traders. As I have been doing many times since the March 2020 Corona Crash, I have been mostly shorting indexes near the tops of up-waves just prior to a decent pull-back where these trades come into profit.
And when it appeared the decline was running out of steam, I advised taking those profits. And for members who refused to do that, I advised moving protective buy stops to their Break Even level, thus producing zero loss on that trade. The net result was that even in a bull market, it is possible to make money (or not lose it!) being a bear!
Of course, in hindsight it would have been better to buy the dips, but can you be sure you have located the bottom of the dip, or will it go even deeper and produce a big hit to your equity? Personally, I feel very uncomfortable in this scenario! That is why I do everything I can to avoid it.
Sadly, many traders decide to take either a bullish or bearish view and stick with it through thick and thin. They read articles supporting their view and avoid those that don’t. And when market action clearly goes against their view, they fail to amend their actions. Being nimble is an essential quality for a swing trader.
Yes, when we look back, all seems obvious, doesn’t it? But in real time as you stare at your screen, what action will you take? Will you click on the left hand box, or the right hand one, or go away and make a cup of coffee? You have three basic choices (actually more than three including bet size and stop level).
That is why all traders need a plan first to guess the market direction as you hover over your screen and then where to place stops if wrong. And that is what membership in my VIP Traders Club can offer you. It is not just the profit potential in many of my trades, but the equity protection against major loss (the winners take care of themselves).
And for investors/traders in individual shares, my Pro Shares service offers similar plans.
In honour of the New Year, I am offering all my blog readers
FREE ONE WEEK ACCESS TO MY DAILY VIP TRADERS CLUB TRADE ALERTS
Starting Monday 3 January and ending Friday 7 January. They will appear in your inbox around 7 am every morning. Be sure to watch out for them! Judge for yourself if my ideas can help you locate well-timed trades.
And at the end if you decide to take up a membership, you will also get another two weeks FREE before any payment is made. Three weeks of free membership of my VIP Traders Club is an offer too good to miss!
You will get my coverage of many markets from stock indexes to currencies to commodities – and Bitcoin. Markets have suddenly turned volatile and I offer high prob/low risk trade entries with ideas on when to take profits using my unique Tramline Trading methods.
Or you can have your Free Trial now here
Commodities remain in historic major bull markets
I have been banging the drum for the US agriculturals – Wheat, Corn, Soybeans, Cotton especially – since July 2020 when near their historic lows. These are major markets that demand attention from serious UK traders. In fact, they are the earliest futures markets on the board. When I started getting interested in the financial futures markets, they were the largest in terms of trading volumes (they had little competition back then as stock index futures were just glints in the eyes of the exchanges).
Historically, they all have shown price extremes as global weather patterns and disease have impacted all markets over the years as have gluts. And that has offered savvy traders huge profit potentials from the wide swings – and that is what we are seeing today in spades.
Here is the historic Wheat chart
The Feb 2008 ATH is at 1340 not as marked
One of the most remarkable features of this chart is the recent pause at the Fib 50% correction of the wave off the 2008 ATH to the low in 2016. I believe all who dismiss chart reading as hocus pocus (yes, there are some esp in the MSM), I would point out that markets do have memories – and often long ones. How did the market know after 13 years that it would pause at a significant Fib level? It still amazes me.
A Buy Low/Sell High stock candidate – a Christmas present for you!
I like buying shares that have fallen on hard times in basically solid companies. I often feature them in my COTW articles for Interactive Investor. And I believe this is such a candidate – ASOS – which is a UK online fashion and beauty operation. Like many online firms, it experience rapid growth at first but then ran into some difficulties and the shares that were stock market darlings turned into pariahs.
This is when the viability of the company is tested. This is when the men are separated from the boys in terms of management. Get it right and you will be picking up shares cheaply. But conversely, the opposite is true! I believe these shares are worth a punt – and who knows, they may be a long term hold.
Here is the weekly chart and right away, I see the deep decline to the Fib 76% on a very strong mom div. That is our ideal set-up for a low risk/high prob trade/investment. An upward break of the trendline should draw in more buyers and short covering and set the seal on the start of wave 3 or C up. The lesser ambition is for the wave to be a ‘C’ which will contain five sub waves at test the old high at £60 in time (currently £23.
But any move into new lows below £18 would be problematical but currently, odds strongly favour a rapid rally phase just ahead. This share is suitable for spread betters and investors alike.