There comes a time when everybody is confused. Buy the dips don’t work. Trading becomes punishment, and slowly traders lose interest. But if one has to be in the game for a long time, one should never lose the feel of the market. Switch to paper trading. Try understanding what’s going on and once you get the feeling that things are working, make a comeback. The market rewards survivors. One of the objectives of writing these price action stories is to keep you all engaged even when things look extremely tough.
What did I learn from Illumina Trade?
Three lessons: 1. Nothing matters when the market becomes bad; 2. Resistance matters in the Bear market and 3. Stop Loss saves you from catastrophic loss.
Illumina is a global leader in DNA sequencing. It came out with a solid business update (strong revenue and earnings guidance). It even impressed brokerages and Barclays Capital even upgraded the stock but then 🙁
Illumina made a Large Candle move, the move that usually gets bullish traders excited but that move stalled at the resistance and since then there has been relentless selling. It was the stop loss that saved me.
There is no follow-through. Example: KB Homes
You love when stocks make a move and then there is a follow-through move. That’s the idea of trading but in January, most of the stocks make a move for a day or two and then collapse, no matter how good the newsflow or earnings is. I am not even talking about Tech stocks. Take KB Homes KBH as an example.
There was a strong Gap up move on earnings and then nothing. Total collapse 🙁
Can one make a bullish case for Atlassian Corp TEAM?
Strong earnings that result in a bullish market reaction can put a cap on the downside. The company Atlassian TEAM (owner of Jira Software) yesterday reported better than expected fiscal second-quarter earnings and revenue while guiding higher for the current quarter. The beaten-down stock is making a big move.
What makes the stock more exciting – the company is transitioning to a cloud-computing business model. The market hates loss-making Tech stock but that’s not the case with this company. The Earnings pop has happened. The big question: Will there be follow-through?
If I buy, I will keep a stop loss at 305. Here’s why
Why I will hold Las Vegas LVS for now
Las Vegas Sands LVS is more a play on Macau, than Las Vegas. So when Macau clarified on Casino licensing rules which favor LVS, there was a big gap up opening but again no follow-through. The worst part – it has stalled at the resistance.
LVS is not a tech stock and is an economy reopening play. Fundamentally, there is not much to worry about as the company bets on a growing region – Asia. Hence, I am willing to hold the stock as long as it holds $41.
The theme in Bull Market – Marine Shipping
The shipping industry consists of companies that transport cargo around the world, from grains to apparel to electronics to appliances.
Two stocks the market loves in the space: 1. Danaos Corp DAC and 2. ZIM
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
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