The boring market report April 7th 2021

The so-called pandemic continues to weigh on some parts of the world (e.g Europe) while some countries like US or Russia seem to see the light at the end of the tunnel! We will therefore continue to be driven by good news but also possibly by new lock-downs as politicians find it is convenient to keep people under control … until people awaken!

Bitcoin is still floating at high levels. Many expect a sharp correction to 40k or even lower, which is not impossible as can be seen in the short history of Bitcoin. Others still point at even higher targets.

I have been a bit too optimistic as can be seen from chart below:

After going through reaction line, there was just no resistance but the problem is volumes did not pick up immediately, resulting in this range bound market. As long as Bitcoin hovers over green average, no worries, I am not changing my position.

Tezos reached my objective almost on time, landing me a cool 40% profit! Nothing to be proud about that. Trade is not over, the volumes, as opposite to Bitcoin, are picking up and reactions lines will most likely be broken for further up move.

Nasdaq has resumed its uptrend in strong volumes. The new objective is 14130 points. A divergence with MACD histogram tends to confirm new all time highs are coming. Before going full speed, just spend some time a weekly chart below: no major correction since early 2020, plus a MACD with stratospheric value and a divergence with MACD histogram indicates some trend change in the future (remember it can be down or just an horizontal wandering)

I was kicked out of the Moderna trade for a small loss. What happened?

MRNA had made a bottom on orange reaction line (blue circle)and started an up move after down slopping the blue reaction line. Volume was low but I thought divergence MACD and its histogram would support me. Market thought otherwise, volumes did not pick up and MRNA even crashed the orange reaction line, which told me to get out even before my stop was triggered! See you on next reaction line, maybe…

That’s it for today. Until next time, trade safely!

Tezos – new departure to the moon?

I possibly mentioned Tezos earlier. Maybe I had not drawn the action and reaction lines. As can be seen from graph below, the trend is still up, Tezos has been taking some leisure time around the reaction line and seems to be going up again. You can draw triangles if you wish, but note there is no special scientific theory backing up such figures!

On the downtrend from 5$ to 3$, of course volume was big, it has decreased a lot but stays at high level. This is why we want to stay with the major trend which is up! Divergence between MACD and its histogram also points to same conclusion. The next reaction line is quite far away, objective could be reached by end of March if we are lucky and market is strong enough!

How do I play it?

I already have a position that I bought at 2$ (green arrow) and I halved it at 5$ (objective was 4.57$). New objective is 6.23$, 40% on top of current price with a stop at 3.70$. So I am buying half a position to restore one full line, half a line invested for as long as long term trend is up, the over half is trading to increase profits. The stop applies only to half my position.

That’s it. This is no recommendation of course. Until next time, trade safely.

Moderna – could the vaccine make your money?

Whether you are anti-VAX or not does not matter, money does not smell! Let’s look quickly at Moderna chart.

My system rings the bell, saying there might be an opportunity today. The 9-day average is point up, as well as the 48 which is still bullish. Only the blue 18-day is still showing negative slope.

The objective (drunkard theory) is 200$ and as can be seen from reaction line, there is zero resistance in the near future. Nothing seems to prevent reaching the objective. Stop of course at 126$

But wait? MRNA is down 7% today… it it? That’s good because distance to stop was big at close yesterday, meaning your position should be small, whereas today we can have either a bigger line or stay with small line but with a better risk/reward ratio!

This is no advice of course. This is how trading goes, we take the bet, and if we are stopped out, then it’s life, we cut the line and forget about MRNA.

That’s it. Until next time, trade safely!

Short Tesla and Buy Ferrari?

Tesla may have gone up pushed by a whale and bulls have bought hysterically the stock. But it was stopped… by a reaction line! Just kidding of course, but it is worth noting that the action-reaction theory works whatever market conditions to predict somehow where market hiccups or changes direction!

Market fundamentalists estimate the real value of Tesla to be around 240$, meaning it was somehow well priced beginning of July before acceleration. Shorting Tesla is an interesting bet but be careful, trend is for now up and very strong, volatility needs to decrease first so it can go up for a downtrend!

No need to say I am very bullish on Tesla in the long term but they need to produce and sell more! Back to basics!

Ferrari on the opposite did not benefit too much from recent rally, a small 50% gain! Because of small volumes and many gaps, I am working on the 3-days graph! Stocks still bumps on random walk lines and Ferrari was also stopped by a reaction line. Ferrari is a totally different business: you order one now for 100k$+ and you will be delivered in 2022! The correction is likely an opportunity to get extra stocks if you can not afford the car itself (even second hand units can be more expensive than the brand new ones!)

I will follow this idea in coming weeks: short Tesla and get more Ferrari stocks with the gains! Careful! Market needs to be re-assessed with each new data and I may totally change my mind. Market is not ready for now.

That’s it. Until next time, trade safely!

July 27th 2020: Will S&P500 go through?

S&P500 is stuck behind the reaction line. It can go through or slide down along the line. Again, see how reaction theory does not predict where market is going, but tells you where market may be in trouble, and that is more than good enough! Just have a stop at 3040 and do whatever you want with your day!

S&P500 market analysis June 15th 2020

S&P500 seems to continue sliding along reaction line but, as you can see, the 3 moving averages are still up, more or less for the red one.Markets may decide to move up again, we will see. A bit too early to to say markets are resuming the down trend. Objective 2680 unchanged but unlikely for now!

What is happening? It is all about COVID-19 again. The epidemic is more or less, rather less than more, under control. There are still hundreds of new cases in most countries every day, even those who have completely stopped the containment measures. If people wear a mask, of course, odds are in their favor they will not catch it. But what about all these demonstration throughout the world? Nothing is really under control, safe vaccine is long way before being available. It is likely markets are going to jump up and down a few times along pandemic making trends or moving sideways!

S&P500 market analysis June 8th 2020

Warning signals conjunction are always important to watch!

The kagi line is closing to Bollinger upper band. From there, it can go through or reverse. In any case, it is worth securing partial profits or revise stops upwards.

On candlestick chart, price is also closing to reaction line shown last week. If it goes through, there is virtually no resistance until next one. Pretty much like a plane taking off, speed is important for air support under the wings. The opposite scenario is a sliding down the reaction line but we have yet to get a confirmation before looking deeper this assumption.

Two synchronous warnings should wake up your skeptical bull mindset!

That’s it. Until next time, trade safely!

S&P500 market analysis June 2nd 2020

Hello! Mister Market is very optimistic, has gone through the last 2 reactions lines and has stumbled also further from the random path.

This optimism is really puzzling if you are looking at the news on TV but remember that S&P500 is driven mainly by the GAFA’s and Internet sector is big winner of the pandemic. Home office has proved a success for many companies and is going to be a source for cost reduction in the months ahead. Crisis are always the time when creativity works best and remote office was a solution only waiting for the opportunity to prove itself useful in crisis and at any all time!

What do we need to do now? Of course, keep a close watch on index evolution as it scrolls through upcoming reaction lines. There are then many stocks that are still low without any reason other than cash has flown to immediate winners such as Amazon, …. The other sectors such as 5G will restart shortly, American Towers is already making new all time highs! Fasten you seat belts and enjoy the rides!

Until next time, trade safely!

S&P500 market analysis May 25th 2020

I am sure you have noticed by now that this blog is totally original and I will not cover the basic indicators, their usage, … There are millions of sites that copy/paste from each other and you won’t learn from them anything but the basics. It is always a good idea to come back to basics, but profitable trading is about having an edge, so none of basic indicators work for very long, when too many traders are using one, market becomes sort of immune to it!

With this blog, I aim to help you kick some ideas down the road and if you wish you can share on this blog. Maybe it does not work for you as expected, but it may inspire others. Just drop me an email (see pinned message) and I will publish your article!

Let me share a story. For very long years, I made a few trades per year and had absolutely no idea how to get in or to get out. so I did some buy and hold based on randomly selected analysis, watching the stocks loose as much as 50% then going back up… And one morning I had an idea: imagine a very tall tree and there is a big coconut hanging from the top branches and a monkey happens to walk by and being thirsty. The easiest part of course is climbing, reaching the top, secure yourself to branches with feet and one hand while extending the other hand to take the fruit. Then suddenly, one branches cracks. You are still hanging from one branch with one hand but you are still safe, sort of! But for how long? The second branch is bending now and you must make a decision: free fall to the ground (not a good idea) or jump down other branches. This is how I started designing my first trailing stop! See? Let me know how you come up with trading strategies, fun to share and comment!

I still have plenty of ideas to share. I will not share publicly the details of my very best strategy because I am using it, but there is no problem sharing older research material that you can choose to improve on your side and share with the club! Just to give you an idea, we will look at in future posts:

  • EMA, DEMA, and the collection of moving averages
  • Accumulation / Distribution
  • The wonders of smoothed ROC
  • Kagi trading with volatility
  • 3-line-breaks trading with volatility
  • Others

So far I have demonstrated:

  • Markets follow a random path which can be drawn.
  • Markets can trend and this is due to their random nature. See here.
  • The randomness can be measured by volatility. The raw volatility (be it 1-day momentum, True Range, …) is the one to be analyzed and understood
  • You should not try to confirm stubbornly a strategy because cases where your strategy does not work surely exist and might even be the most profitable cases! Market’s got some sense of humor :-))

Now, as title implies, let’s look at S&P500 and where it is going!

As a continuation from previous post, I have left the random walk path and you can see that our drunken man does not seem capable to go more that 2 steps away from the main path.

If you have read my initial posts, you know I like a lot Action/Reaction lines because tops and bottoms are often building on those. Here we are precisely with 2 solid blue lines across the path. Unless S&500 goes through forcefully, we are in for a reversal. I have included Accumulation / Distribution at the bottom, which is a good indicator when you have nothing better, just add a 20-days simple moving average. There is not much energy: look at the slope of price versus indicator! We need some very good news to move up now! So yes, I would wait a few more days to see where we are going and go short if confirmed for an objective at 2400. This is absolutely no advice!!!

Until next time, trade safely!