If You Aren’t Long, You’re WRONG!

Vacation is tiring…

While I had a nice extended weekend celebrating Independence Day with family, I couldn’t wait to hit the ground running for a full week of trading! For me, it’s much easier to sit and trade — much more relaxing than boating, jet skiing, and paddle boarding in the hot sun.

Fortunately, I had the opportunity to get off the hot beach and go waterfall hunting with my daughter. Watching the water crash over the rocks reminded me to go with the flow

waterfall

It’s especially nice to be able to work and play with the profits we pull in playing our “lifestyle options”. After all, if you can’t do what you want to do with your free time, all the gains in the world can’t make you happy.

Think about all the investors out there right now that are fighting the market’s powerful current right now — an impossible feat that often leads to disastrous results. The money flow in the markets now is like a full-fledged waterfall in the face of shorts fighting the market. Until the flow comes to a manageable trickle, the only thing to do is enjoy the beauty and power of physics in action…

Bottom line: The markets are trending higher. We can’t ignore the bullish action!

Last week’s breakout boom in the S&P 500 was exactly we were looking for. Stocks were strong right out of the gate this week, confirming the breakout move. The wedge pattern with lower highs and higher lows for a month in the broad market barometer above 3,100 now targets 3,250 — the width of the sideways slowdown. Don’t ignore this pivotal price action!

If you aren’t long, you are WRONG!

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Another tech leader breaks out

greg guenthner

It’s no secret that big tech stocks are leading the market higher this summer. The Nasdaq Composite continues to outperform the S&P and Dow — it’s now up more than 16% year-to-date, and an astounding 50% off its March lows.

This week, yet another key tech sector is breaking out to new all-time highs.

Check out the VanEck Vectors Semiconductor ETF (NYSE:SMH):

SMH

Semiconductors were market leaders before the coronavirus crash. Now they’re retaking their place on top of the tech food chain following a beautiful one-month consolidation in June.

As tech continues to dominate the recovery, this breakout shows that we’ll soon see some fresh semiconductors on traders’ radar in the weeks ahead…

Trading Tip of the Day

To book consistent trading gains, you must learn the forces at work behind breakouts — the short-term momentum moves that cause quick spikes in stocks.

When it comes to short-term market moves, traders and the financial media like to toss around the term “breakout.” But no one ever talks about why breakouts work — and why identifying strong breakouts is one of the cornerstones to trading success.

Short-term traders study the supply and demand of a company’s stock. These are the two forces responsible for the movement of every single stock that is traded on an open market. We study a stock’s price action to determine where those supply and demand levels lie.

In fact, supply and demand are the only factors that directly impact a stock’s price. Even though fundamental factors typically cause an increase in demand (and in price), those fundamentals can often become out of sync with market prices.

Think of the big crash we witnessed earlier this year. Both “good” and “bad” companies saw their share prices drop as the major averages declined. Even in so-called “normal” market environments, you will find stocks belonging to companies with strong fundamentals that are completely ignored by investors when the market is moving higher.

These disconnects tend to baffle and frustrate most investors. After all, why should “bad” stocks go up while “good” stocks suffer?

That’s why we focus on price. When you’re trading, results are all that matter. You want to sell your stock for a higher price than you paid for it in the first place. In the stock market, the only facts are prices, which are affected by buyers and sellers — supply and demand.

Everything else is just noise.

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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