Date: 5/19/2022
Author: Chris Hood
Be sure to check out new episodes of my video podcast each week, where my ace pupil Brian Jones and I talk the ins and outs of options trading- and give you insights and strategy that you can immediately put to work for you in the markets.
I’ve been looking at lots of market sentiment data recently…and it doesn’t look good.
Honestly, I don’t think I’ve ever seen data this bleak.
It’s even worse than the pandemic.
This doesn’t paint a rosy picture for the market in the coming months.
The market is choppy… exceptionally so. And though the 385.00 support level seems to be holding reasonably well, my indicators suggest that the market may fall a bit more before we find a bottom.
If this breaks, it will likely drop like a stone to 370.00
Could I be wrong on this?
Of course.
I’m the first to admit that predicting market direction (especially in times like these) is a fool’s game. So please keep this disclaimer in mind.
However, I trade the charts, and they are about as bearish as I’ve seen in a long while.
I’ll only go on record with this. Given the information as I see it, the probability of more downside is higher than a reversal.
But the market can literally do anything. So if you hold short positions, be ready to exit if they hit your stops. It’s not my fault if the market suddenly roars to life and smashes your trades.
This is no time for strong biases or heroics – exercise EXTREME caution.
So what should you be doing right now with your trading?
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If you’re a novice, I suggest taking a seat on the bench and watching the game from the sidelines. Conditions like these have a tendency to wipe out newbies.
The only sector that I might recommend for novices to consider is energy.
Despite the massive drop in equity prices, energy is holding up well, and I believe there is more upside to come.
If you must trade long, look at index ETFs such as XLE, GUSH, IXC, or USO. Filter these through your rule set, and you’ll likely find some bullish trades there.
More advanced traders need to focus on quick trades.
Use shorter time frames or day trade if you have the skills. For example, I’ve had recent successes with the 15, 30, and 130 min charts.
Lower your expectations and scoop up profits quickly before they disappear.
With a market churning like this, you can make money both long and short on the same day. But only if you’re in and out in a flash.
Getting into the specific trade strategies and set-ups I use to profit in a market like this is a bit beyond the scope of this short article. However, it’s something I cover extensively with my subscribers.
The key now is to play an effective defensive game.
Shift your focus to risk management. Of course, this should always be your top priority, but it’s more critical now than usual.
Tighter stops, smaller positions, and only your highest probability set-ups.
Most big money institutional traders and hedge fund managers are likely just sitting in cash…waiting for clarity. They’re following the standard axiom – “Sell in May and go away.”
I know this because I know how they trade. The lack of market liquidity (buying and selling) in the options chain confirms it.
Maybe if I were a billionaire, I would too. But I’m not, and personally, I love the challenge.
Trading is more than just a profession for me; it’s akin to a spiritual discipline.
Most of you aren’t professional traders, so no one is forcing you to enter new positions. Just sit tight and wait.
If you don’t know what to do, don’t do anything.
Or better still, switch to paper trading and hone your skills without the financial risk.
If you own quite a few stocks, consider protecting them with short calls, long collars, or married puts. This is how I manage to grow my portfolio no matter what happens.
If you need help with this…well, that’s what I’m here for.
All you need to do is join me and the other Alphahunters.
Trade safe out there.
Cheers,
Chris Hood
PS – If you find these discussions helpful, head over and check out Hood Talk, my weekly YouTube video on Rogue Investing’s channel. Free tips and market advice to help you make massive profits. Click here for the latest episode.
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