Bearish Market - Trades For Monday 08-04-24

Summary

In this weekly trading video, Pete Sters reviews his past stock picks, discusses market analysis, and shares systematic trading approaches. He advises on day trading due to an anticipated market inflection point, cautioning against swing trading without technical confirmation. Sters emphasizes the importance of adapting to market conditions, using trend lines and indicators like the RSI for entry and exit points. He also provides specific stock examples, such as ULA, COST, RTX, and MC, detailing their performance and potential future trades. The video concludes with a strategy for identifying short-selling opportunities in a declining market, focusing on stocks with significant breakdowns and resistance levels.

Takeaways

• 📈 The speaker emphasizes the importance of reviewing past picks and not just presenting new ones, ensuring that the audience can see the performance of their trades over time.
• 📉 The speaker has been encouraging day trading due to an anticipated market inflection point, advising against long-term swing trades until technical confirmation is evident.
• 🛑 The speaker warns of the potential risks of relying on bullish trades without adjusting portfolios and trades in response to market changes, highlighting the importance of reducing long exposure during a pullback.
• 📊 The speaker discusses specific stock picks, such as ULA and COST, providing analysis on their recent performance and future predictions based on technical indicators and market trends.
• 📉 The speaker mentions a preference for short positions in certain stocks like Costco, based on bearish patterns and the belief that there's room for these stocks to decline further.
• 💡 The speaker highlights the significance of watching market reactions to earnings reports and economic indicators, using these as cues for trading decisions.
• 📊 The speaker provides a detailed analysis of the market's technical levels, including trend lines and moving averages, to predict potential support and resistance areas.
• 🚫 The speaker advises against taking swing trades without clear signals of market direction, emphasizing the need for caution and waiting for confirmation of market trends.
• 📈 The speaker suggests that after a significant market pullback, there may be a short-lived reprieve or bounce, but anticipates a continued downward trend towards the 200-day moving average.
• 📉 The speaker discusses the impact of mega-cap tech stocks on the market, noting their recent negative earnings reactions and the potential implications for the broader market trend.
• 🗓️ The speaker anticipates a seasonally bearish period for the market in the coming months, influenced by factors such as election uncertainty and a news vacuum, advising traders to be prepared for a choppy market.

Q & A

What is the main difference between the approach taken by the speaker and that of 'Internet gurus' when giving stock picks?

The speaker emphasizes accountability and follow-through, stating that unlike 'Internet gurus' who may give a pick and then not discuss it further, they review every single pick they've made, showing how it has performed and providing updates while the opportunity to act is still available.

What is the speaker's view on the importance of technical confirmation before starting bearish swing trades?

The speaker believes that technical confirmation is crucial before entering into bearish swing trades. They have been encouraging day trading instead of swing trading until such confirmation is evident, to avoid premature entry into the market.

How does the speaker describe their approach to teaching trading strategies?

The speaker teaches trading strategies through a systematic approach, which includes reviewing past picks, market analysis, and finding new trades. They also encourage viewers to watch their videos from the 2008 financial crisis to understand the validity and time-tested nature of their teachings.

What was the speaker's strategy for the last few weeks in terms of trading advice?

The speaker had been encouraging day trading for the last few weeks due to an anticipated market inflection point. They advised against swing trading until there was clear technical confirmation, aiming to provide lead time for adjusting portfolios and trades.

What is the significance of the stock 'Ula' mentioned in the script, and what does the speaker suggest about its performance?

'Ula' is a stock short pick given by the speaker about a week and a half ago. The stock had broken down below a major horizontal support level, and the speaker reviewed it in recent videos, still favoring the short position as it had digested some losses and then experienced renewed selling pressure.

What is the speaker's view on 'Costco' (COST) as a short and why?

The speaker sees Costco as a potential short. They highlighted a bearish engulfing candle on the stock chart, indicating a likely downward move. Despite the stock being relatively stable due to its nature as a consumer defensive stock, the speaker anticipates another leg lower, possibly to the 100-day moving average.

What trading strategy does the speaker suggest for the stock 'RTX'?

The speaker suggested 'RTX' as a long position, citing it as an example of a stock that showed relative strength during market selloff. They mentioned the importance of having both longs and shorts in a day trading strategy, especially during periods of intraday volatility.

What is the significance of the 'HWM' stock mentioned in the script, and what trading actions did the speaker take?

'HWM' is another long pick highlighted by the speaker during a live event. Despite the stock opening below the average volume weighted price (AV WAP) on Thursday and Friday, the speaker took advantage of day trading opportunities and set an alert for a potential entry off a bounce based on the LSI indicator.

What is the speaker's view on the current market conditions and their implications for trading?

The speaker believes that the market is entering a soft patch, with mega cap tech stocks showing negative earnings reactions and economic indicators pointing to potential recession. They suggest that traders should be in cash for now, waiting for clear signs of market direction before entering swing trades.

What advice does the speaker give for identifying potential short positions in the market?

The speaker advises to look for stocks that show relative weakness, especially those that have displayed recent relative weakness. They suggest waiting for the market bounce and observing if resistance levels hold, which would indicate a good entry point for short positions.

What is the speaker's outlook for the market in the next few months, and how should traders adjust their strategies accordingly?

The speaker does not expect a significant market rally in the next two to three months due to factors like election uncertainty and a potential news vacuum. They recommend traders to be cautious, use high implied volatility for selling out-of-the-money bearish call spreads, and consider buying deep in-the-money put premiums for swing trading.