stock price trading

monica-kingsley

Fed Goes All In - As In All In, and Stocks Like It - Part II

March 25, 2020, 9:56 AM Monica Kingsley

Trading position (short-term; our opinion): long positions (100% position size) with stop-loss level at 2380 and the initial upside target at 2475. Stay tuned as finetuning the open trade positions' parameters during the day is highly likely.

As if the Fed's unlimited QE wasn't enough, we'll get a $2T stimulus now. Predictably and much to our subscribers' delight, the S&P 500 loved that. As it sprang to life, we've already cashed in an 82-point profit on that upswing. As we're currently riding another immediately profitable open position, what kind of gain will it bring this time around? In other words, will the futures keep on climbing later today as well?

Cutting long story short, it's highly likely. Let's start our analysis with the daily chart examination (chart courtesy of http://stockcharts.com).

Stocks both opened and closed on a strong note yesterday. And the volume wasn't at all shabby. After the overnight climb higher, they ran into quite some fast and furious selling earlier today, which wepartially avoided. Instead of seeing gains shrink, we still cashed in an 82-point profit. As the selling pressure dried up, we entered the market again, and are currently riding the momentum for an open gain of over 50 points as the futures change hands at around 2475 currently.

While the daily indicators are solidly in bearish territory, they're increasingly curling higher, thus supporting another leg up.

Let's remember our Monday's notes regarding the market breadth indicators:

(...) While they all confirm the bears as being in the driving seat, new highs minus new lows reveals that the sellers aren't as strong as they appear to be when one looks at price action only. The bullish percent index has also curled higher despite new 2020 lows being hit.

As a result, the market breadth indicators indicate a high likelihood of pause in the trend of continuously lower prices. Be it in the form of a sharp rally that runs out of steam relatively fast, or a somewhat more prolonged sideways trading with a bullish bias, it nonetheless justifies our decision earlier today to take the 168-point profit on our short positions off the table.

On top of today's and yesterday's gains, these observations keep turning out as expected. The Summary just below captures the short-term outlook accompanied by the trading plan.

Summing up, whilethe bears have the upper hand, the potential for a temporary upswing to continue, is still there. And this Fed and stimulus-triggered move might surely stick on. As the markets like this move, it makes sense to give it the benefit of short-term doubt. Considering the risk-reward perspective, please see our game plan within the Trading position section.

Trading position (short-term; our opinion): long positions (100% position size) with stop-loss level at 2380 and the initial upside target at 2475. Stay tuned as finetuning the open trade positions' parameters during the day is highly likely.

Thank you.

Monica Kingsley
Stock Trading Strategist

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