On November 10, 2022 at 9AM the $SPY caught fire.
It made a 5.6% increase from $375 to $396, a gain of 5.6%, within 24 hours. But why?
“U.S. consumer prices rose less than expected in October, pushing the annual increase below 8% for the first time in eight months, the strongest signs yet that inflation was slowing, which would allow the Federal Reserve to scale back its hefty interest rate hikes.” - Reuters reports.
With inflation easing there’s hope we can return to better market conditions which will hopefully see an increase in market volatility, including in the micro-cap world.
Will it last? Nobody knows but you should always be prepared, learning to improve your mindset to take advantage of any and all market opportunities.
Lesson: To survive and thrive in any market you need the mindset of an athlete. Check out our Mindset for Exponential Growth webinar with Edu Trades here.
Switching Bias: $TBLT A long and a short.
Can a stock be a long and short at the same time? If so, should you trade two biases on the same stock on the same day?
It has been a long debated question whether or not a trader should switch bias on a stock he or she is trading. For example, if it was just a short, how can it suddenly be a long?
Let’s break this down in more detail, previewing the market action on $TBLT on November 14, 2022. It could be argued it initially appeared to be a short below the yellow pre market high line, before becoming a long opportunity when the price action rose above the same line.
Let’s explore both of the theses.
The $TBLT short
Looking at the $TBLT daily chart you can see it ran down from highs of $20s to lows of $2s. These types of charts have ‘bagholders’ in them: people who took a losing long position in the company who are now desperate to sell for any higher price. This ‘bagholder resistance’ (extra selling pressure) prevents the price from going higher, sometimes creating a good short opportunity.
The short trade was against the pre-market high (lower yellow line) risking the line. It didn’t work, that’s trading. But it could be argued that shorting a chart with heavy resistance and ‘bagholders’, into a key resistance level was a good strategic plan, executed well.
The $TBLT long
Once $TBLT holds above pre-market highs (around $2.80), it is commonly thought that shorts holding above that level will need to cover as the plan above failed. These cover orders can push the price higher.
Typically, when stocks that are expected to fail don’t fail - they squeeze, due to the amount of stubborn shorts who refuse to accept their loss and that the stock won’t die.
See two long trades highlighted with a yellow rectangle taking advantage of momentum to the upside.
The thought process around this trade is covered in more depth by professional trader and mentor JTrader, in a ‘Talking Tickers’ episode.
Lesson: In an episode of Talking Tickers with Jtrader he discusses bear traps and upside momentum opportunities here.
And that’s a wrap. Let me know your thoughts on the market and whether you should switch biases by reaching out to me on Twitter: @Jonk87
Safe trading.
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Reference
- ZeroPro | Trading Software: Accessed: 11/14/2022
- Reuters | U.S. inflation turning the corner as consumer prices rise below expectations: Accessed: 11/14/2022 (https://www.reuters.com/markets/us/us-consumer-prices-increase-less-than-expected-october-2022-11-10/)
- YouTube| Mindset for Exponential Growth | Dan Pipitone interviews Edu Trades: Accessed 11/14/2022(https://www.youtube.com/watch?v=8dANZGrsFkY&t=2s&ab_channel=TradeZero)
- YouTube| Talking Tickers: October review with JTrader & Stephen Johnson Accessed 11/14/2022(https://www.youtube.com/watch?v=2_KoTSkodkY&t=456s&ab_channel=TradeZero)