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A Market Crash - What to do


Those of you that follow me closely, will already know, that around 2 weeks ago, I sent my usual weekend stock picks, with the sensationalist headline - “Market Crash Incoming”.. this is what you would have seen in your inbox, some of you will have watched it and dismissed the headline as click bait, but for those that follow me religiously, and those that understand my disciplined approach to the market, you probably understood there was something not quite right…. I mean…. how does little old Sam from Scotland know there’s trouble on the horizon… and how did he see signs of trouble? Why is he now focusing on Short positions in his stock picks?

Hopefully today clears up a few things, and what I see and hopefully what I’m going to share with you today will give you some food for thought.

Enter Exhibit A - The Dow

Dow 18th Oct 2018.png

When the DOW failed it’s break out for a 2nd time, what we know about failed break outs in the major indices is that they can often result in FAST moves in the opposite direction - this is what happened.

Enter Exhibit B - Tech

Tech 18th October 2018.png

On the very same day the DOW failed it’s break out, we also seen Tech drop out of it’s volatile Uptrend channel that it had been trading in for months, this was NOT a good bullish signal

Enter Exhibit C - Russell 2000 - Small Caps

Russell 2000 18th October 2018.png

The Russell 2000 Index was flirting with the 200 SMA, and had reached over sold conditions for the 1st time since the corrections at the beginning of 2018… again… not a bullish sign.

How to put it all together

We must always be mindful of what is going on with the overall market, and we CANNOT be short sighted in our approach. We know when sectors drop, the individual components within that sector are likely to drop also (sure there will be anomaly’s), but on balance, the environment on the weekend of the 6th October was not a good place to be, and certainly warranted caution… did I expect the drop / volatility that we’ve seen? Maybe, but if truth be told, I expected the drop to happen in September, so I was lucky enough to be sitting on cash at the start of October, and this carried me though a tough time, and fortunately enough I’ve relatively unscathed aside from a couple of very minor losses.

It’s amazing how quickly we must adapt our interpretation of the markets, only 1 week before, I was happy at new All Time Highs… I was having discussions with clients about looking to move myself up to Full Risk on the back of the All Time Highs, and then… just like that… the market flipped.

Those that are new to the markets… it’s an unforgiving place, but you need to learn how to profit in both directions. It’s crucial… you can’t just take buy positions and hope for the best, and by educating yourself on how to profit in all market conditions, you stand a better chance of success, that I promise.

Are there opportunities for discounts on the drop? Absolutely…. but unfortunately, the market just isn’t returning the ball to us just now… we’re playing the long game… but for those of us that understand where the opportunity is presenting itself (i.e me)… there are some reasonably safe places to be just now in terms of trends, and this is where we should be concentrating our efforts.

My guys have been briefed, they know where to look, and they know the strength is to the down side just now… it’s just about knowing how to profit, and how to action a plan.

If the market DOES crash, will I be bothered? Not in the slightest… because I know how to profit… when 1 market declines… alternative markets will move… this is how the stock market works… learn how to do it, learn how to profit, and you’ve won half the battle.

If you’re interested in education and you struggle with your trading results… we’d love to hear from you.

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Sam McCallumComment