Inflation Shock and the Price Action

Here are the market observations for today:

1. U.S. October consumer prices jumped more than expected to 6.2% 🙁
2. Inflation is not transitory. There has been some structural damage in the global supply chain and its impact on prices is for real.
3. Thought: How can you be bullish? Inflation is “sticky,” the economic cycle is maturing, price-to-earnings ratios are high and earnings per share growth is set to moderate
4. There will always be a reason to be bearish but what the market is doing counts much more than the reasons you have.
5. S&P 500 seems to be holding the bullish line for now and it seems buy the dip crowd continues to be active.
6. One trading rule that’s very simple: Never buy any stock ahead of earnings (Example: Fubo) and even better book profits when it’s trading near resistance and earnings is just around the corner (Example: ME).
7. But BUY when a stock breaks the resistance on earnings or some fundamental news flow. I will buy MP near $40. MP Materials is a major miner of rare earth minerals in the U.S.
8. Speaking of trading rules, one more rule to follow – Never attempt to buy a stock that is not in sync with the market. It means if the market is trading near highs and the stock is trading near lows, then it’s not good. Such stocks are vulnerable and sell off even from their lows. Example: Paypal
9. One should always take windfall gains. AMD from the levels of 75 is up 100% over the last six months. It was the reason I recommended taking profit yesterday.
10. I don’t know what AMD stock will do in the future. I am in no way suggesting that AMD stock would collapse. All I am saying – we are not in the market to make all the money but decent money or get precise exit levels. 
11. Silver making a decisive move today. It looks good. Here’s how it looks on the chart.
12. I recommended Coty yesterday on Earnings Gap up logic but today stock is down on the news that KKR Private Equity firm has made a complete exit from the stock. The stock remains an attractive buy as long as it holds 10.
13. When it comes to investing, theme-based investing matters. The market is bullish on Hydrogen economy stocks and no wonder all the stocks be it Plug Energy, Bloom Energy, and Fuel Cell continue to hold gains.
14. I like stocks when they Gap up on strong earnings report. Roblox is a buy on that logic.
15. Trading psychology, not a trading strategy, is often the difference between a winning trader and a losing one. Focus on how you think

Trade Sheet:

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers