Hey traders,
I got a great question from Mark, one of my followers today. Mark called in to customer service to ask:
What do you do when the major indices (DIA, SPY, QQQ) are not trending in the same direction?
What do you do when the indices are not trending (not above all 3 moving averages or below all three moving averages)?
Great question, Mark!
As you probably know if you’ve been following me for any length of time, I’m a trend trader.
I will rarely ever touch a stock that isn’t trending.
And if I can help it, I prefer to trade in the same direction as the broad market.
That’s where Mark’s question comes in. Because the way things have been lately, it just isn’t possible to trade in the same direction as the broad market.
Just look at the S&P 500, represented by ticker symbol SPY:
It’s recently fallen down below the green, 20-day trendline and even pierced the blue, 50-day trendline.
When a ticker is between trendlines like that, it’s no longer bullish. It’s in a “no man’s land”.
Next up, let’s check the Dow, represented by ticker symbol DIA:
While DIA is technically above all 3 trendlines, look at how much trouble it had back in April and even early June.
During those two times it fell firmly below the mid-term 50-day trendline. That doesn’t make for the kind of strong trend I look for, even if it’s technically above all 3 trendlines right now.
Finally, we look at the Nasdaq, which is represented by ticker symbol QQQ:
It’s no secret that tech has been having trouble lately.
And the tech-heavy Nasdaq clearly shows us that as it’s currently below both the 20-day and the 50-day trendlines.
So this is what Mark is talking about when he asks, “What do you do when the indices are not trending (not above all 3 moving averages or below all three moving averages)?”
None of the three indexes are in a strong trend and 2 of the 3 are in a “no man’s land”, stuck between trend lines.
Mark asked a great question and I’ve got several answers:
Every Market Has Stocks That Are Doing Great
First up, even in the worst markets, there are stocks that are doing great.
In this post I explain how I find them by starting with stocks that are hitting new 52 week highs.
Automate Your Trade
Once you’ve found a good stock to trade, you’ll want to automate it so that whether the stock goes up or down, your trade closes out without you having to watch it.
This lets you capture profit without taking too big of a loss if a stock moves against you.
I explain how I do it at the end of this post.
Go Bearish
Just like every market has stocks that are doing great, every market has stocks that are doing poorly.
In this post I explain how I find stocks to short.
Protect Your Downside & Capitalize on Volatility
For long term positions that you plan to hold, you can protect your downside by buying some cheap insurance.
And when markets get volatile, options premiums start to soar. So become an options seller and cash in on that massive premium.
I explain how I do both in this post.
Hot Stocks To Watch
To give you a starting point, I’m going to share a few stocks in great long-term trends.
Don’t just take these stocks and try to trade them.
Really try to understand what I’m seeing in the chart.
Set up your trading platform with a 20-day, 50-day and 200-day moving average like I show you in this post.
Just by doing that, you’ll dramatically improve the way you see the markets.
3 Bullish Stocks
- DTM
- EQH
- ZETA
1 Bearish Stock
- PEN
Trade well,
Jack Carter
P.S. I shared my 3 Golden Rules for building for building a rock-solid “Profit Sharing Payment” Portfolio. Get them here — completely FREE!
