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How to play the game

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Knife Edge

As I write this weeks blog (whilst listening to the Bill Burr podcast) It’s been an interesting week on Wall Street, with the Market still sitting just below key levels and it’s really just been moving sideways over the last few days, not doing very much. Some stocks have gone up, some have gone down, they’ve then reversed roles the following day so there’s currently no real Trend in play and the question I’m being asked the most at the moment….

Sam, what trades are you taking?

The short answer is none… I have zero open positions, because the market is not trending in either direction, this is my own personal risk averse rule set in play, but that doesn’t mean my group are not profiting.

Although I’m currently Bearish on the Market, as per last weeks blog, I am fully prepared to reconsider that thesis in the face of a further leg up on the recent rally (which on a Technical Level - still has a little room to run I should add).

We do have a very news driven market at the moment, I don’t quite see the huge volume that was perhaps anticipated upon a Wall Street return after the festive period, so I do take the rally with a rather large pinch of salt… and for those that understand what I teach, and understand key support / resistance levels… some of my clients have profited MASSIVELY on the bounce to the up side… but I think now is the time to break out the little common sense container and get more defensive, lock in profits and be mindful (just like last week) of key market levels.

It’s important to consider there will ALWAYS be anomaly’s and “glitches in the Matrix”, and it really is important to identify the strength within the market at any given time, and to find the areas of the Market we can profit on. Sure, when the market declines, some stocks like to flip the bird and carry on doing what they want to do, but in a declining market, most stocks will decline, it’s really about identifying the strength and where to accumulate the most profit.

The following chart is unlikely to fall under the scope of most of your charting analysis, but this is why my Trading Community is among 1 of the smartest and most intelligent in the world…. we mostly have the same approach, but when we have challenging Market Environments, we all know HOW to identify strength (as I’ve taught everyone), and it’s incredibly beautiful to see some of the incredible trades that are being taken and the profits being accumulated.

This is a trade that was posted this week, and it has performed as expected but how many of you can identify strength within Brazilian ETF’s?

This is what I do… Clean Charting with many areas considered behind the scenes, but thank you to Perry for his chart this week (I cannot take credit for it, although I have re-created it to make it cleaner looking and minus many Technical’s).

iShares MSCI Brazil 4th January 2019.png

You all by now, understand the Market moves up and down, but it’s uncanny how many times these Key Technical Levels are respected, and as we move into an age where computers and algorithms make the transactions on Wall Street… Wouldn’t it make more sense to learn how to apply the Technical skills to trade WITH these levels, rather than find yourself trading on hope?

Exhibit A - S&P 500

As we can see, we’re still loitering around key support / resistance, just like last week, and given the importance of the index, we simply must keep and eye on it.

SPDR S&P 500 11th Jan 2019.png

Exhibit B - The Dow

A bit more encouraging since last week, and with a News Driven rally driving the market up, if we clear these key resistance levels, and the S&P 500 move off, then it’s certainly a safer market to trade to the up side in my view, and there are perhaps some discounts to be had, but personally, I will identify the strength, and go from there.

Dow 11th Jan 2019.png

Exhibit C - QQQ

Tech resembles the DOW where it goes either way from here.. again, definitely a more encouraging chart for the Bulls out there, but it’s not all rainbows and smiles quite just yet… but definitely a step in the right direction.

QQQ 11th Jan 2019.png

As a Trader, there simply must be an element of flexibility, and we MUST adapt to a changing Market environment, and although I absolutely identify myself as a Trend Trader, it does pay well to have Swing Trading strategies in the locker also, and my tuition does cover some key elements of this strategy also.

What works 1 year, may not necessarily work another … the market never stops educating us, and it never stops throwing mud at us, but discipline and patience is usually rewarded….. so practice discipline and remove the FOMO.

Stay safe out there folks, have a great weekend, and if anyone has any questions, feel free to reply to this email or CLICK THE LINK BELOW if you’re ready to make a change and learn a very specific brand of Technical Analysis

Are You Sick of Endless Losses

Sam McCallumComment