My rule of thumb is to always trade in the direction of the broad market.
But sometimes we can’t do that.
Like in the market we find ourselves in right now — it’s not bullish and it isn’t firmly bearish either.
I call it a “no man’s land” market.
Today I want to show you how I can spot that “no man’s land” on a chart.
If you haven’t seen this video where I show you how to set up a chart, make sure you watch that first, because that chart setup is what I use to spot “no man’s land.”
The S&P
Here’s what the S&P index looks like using that chart setup:
As you can see, the green short-term 20 day moving average and the blue mid-term 50 day moving average are almost touching.
The current price (white lines) of the S&P is slightly below both of those moving averages.
This means the S&P has a bit of overhead resistance as it tries to move higher.
No Man’s Land: Because it’s it’s caught between the the two trend lines above it and the red trend line below it, that’s what makes it no man’s land for the S&P.
The Dow
Here’s what the Dow Jones looks like right now:
We can see it’s a bit more bearish, with the green short-term trend line starting to peek out below the blue-mid term trend line and the price action having a tough time trying to work through that resistance.
The Nasdaq
And here’s what the Nasdaq looks like:
This one is like the S&P — slightly bearish and caught in that same “no man’s land.”
The short-term and the mid-term trend lines are touching right now.
If the green trend line starts coming down below the blue trend line, the market will likely fall down to the red trend line. That’s true for all the indexes.
Individual Stocks – New Highs & Lows
Another thing I like to look at to gauge where the market is, is how many stocks are making new highs vs how many stocks are making new lows.
Make sure you watch the video, because I go through a bunch of stocks in a short time and explain what I’m seeing in each one.
The important thing to realize is that no matter what’s going on in any market, there’s always stocks going higher.
That’s where you have to look at each stock with that chart setup and spot those strongly trending stocks we talked about earlier.
A good example of a strongly trending stock is Goldman Sachs (GS) right now. Take a look:
Notice how the green line hasn’t come anywhere near the blue line, like with the indexes I showed you before?
And the price action (teal and yellow) is well above the green line?
This is a strongly trending stock in a “no man’s land” market.
That’s the kind of chart you’ll be looking for if you’re looking for a strong stock in this kind of market.
A Tip For Trading In No Man’s Land
Now a market like this is going to be volatile and you don’t want to set your trades and walk away without a plan.
One thing I like to do when I’m trading a bullish stock in this kind of market is set a tight stop.
I like to set it at about 7% below my purchase price.
This means that if the stock falls to a certain level, it’ll automatically get me out of that stock with a minimal loss.
At the same time, I set a sell order about 15% above my purchase price. (sometimes I’ll even do 10% just to be safe)
My broker lets me set both of these at the same time as an OCO, or “One Cancels Other” order.
After I place this trade, I can walk away and not worry about it.
And that’s the ultimate feeling of freedom: Picking a solid trending stock, having a plan in place to capture the profit when it goes up, but having a “just in case” order in case the stock drops.
Give it a shot. And remember — if you’re just getting started, I always recommend paper trading it.
That’ll give you the best chance to learn how your trading platform works and work out any kinks before you trade with real money.
Trade well,
Jack Carter
