Mid-week Reversal

Good morning everyone!

It has been a painful day yesterday, with the worst drop since the pandemic started, and we are still standing. We took some pain yesterday but the stops we had in place helped us retain our capital and live to fight another day. Towards the end of yesterday’s tape a glimmer of hope started to appear only to be slashed in the last 10-minutes sell program. How did we prepare for today? The major indices are below all the major levels and we are reaching oversold territory, hence in the last minute sell program we bought some long term call options in the major stocks and indices to take advantage of this sharp downward move. We did not take stocks overnight because there is no technical reason for it since we are in no-man’s land, but we had to try to see if there will be a reversal happening in the coming days. We did not press shorts into this move, but we did not go long, so I advise you sitting on the lines if you were not involved in this move, in order to do some market discovery.

$SPY chart

The backbone of the market got seriously bent, but it looks like it has done a double bottom, stopping right before the 100 day EMA, however there is space until last week’s low of $428.86. I am telling you this in order to make you conscious of the fact that you may experience another drop in the next sessions until the 3rd quarter ends and the institutions start their buy program. Can it also be the beginning of a larger correction? Absolutely. This is why cash is a position in these situations and you should just start slowly investing in the major indices for the long term.


$AAPL chart

$AAPL was hit like all the other major tech stocks, but it did not reach last Monday’s bottom of $141.27. What does it mean? We can expect another drop from this giant, which has been for sale since it went under $151. The longer it stays in this bear flag the longer it will take to recover. We have been engaged in it last week and rode its recovery from the bottom until $147, but then we have just kept some long term call options for January. Yesterday we added to our January leaps in order to take advantage of the drop. As long as it is under these lines it is better not to touch it.


$TSLA chart

This is my favorite stock of the week and month. In this bloodbath Tesla showed impressive strength and it refused to go under any momentum lines. It did not even touch the 8 day EMA. This however it does not mean that it is immune to the market’s downward move. Caution is advised. We exited the stock into strength yesterday, at $795, and we re-engaged it for a bounce from $770 to $785. We kept some call options for this Friday but we are the least invested in this stock that we have ever been since the beginning of the month. I recommend waiting to see the direction of the $SPY and if strength is still present you can always get back in the trade.


I will leave you with a few words for today’s trade: Keep your head clear, follow closely your best friend – the trend- and wait for market discovery. There is a lot of macro chatter, it is the day before the end of the 3rd quarter, the yields are rising and FEAR is high. When all these factors are computed the risk is high and therefore you should be on your toes. Don’t try to make up all your losses in one day only to lose even more, wait for a guiding hand from the main indices.

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