Something big just happened in the market…
We’re at new all-time highs yet again. And my pattern just banked +100% gains.
This price action is incredible. You don’t need to be a Wall Street insider to see that.
Last week it looked like the market was about to completely unravel.
But alas…
- Despite the AI fears.
- Despite the war with Iran.
- Despite sticky inflation.
The bulls keep showing up.
And now that we’ve made new all-time highs with strong multi-day price action…
I’m watching a specific trade setup.
Why I Like Reversals
Long-time readers might already know…
My favorite trades are setups that go against the biggest moves in the market.
- I go long when the market dumps.
- I go short when the market spikes.
“But Jeff, aren’t you trading against an overwhelming sentiment?”
At face value, it might look like that. But in reality, I’m capitalizing on some of the strongest sentiment of the entire move: the pullback.
I’ve explained this idea before…
When a stock pushes too far in one direction, the price action eventually exhausts itself.
The move could continue higher (or lower), but for the time being it takes a momentary breather.
For example: my trade on Amazon.com Inc. (NASDAQ: AMZN) from this week.
I sent this alert to traders on August 3…
Here’s the pullback that came after my alert:
It doesn’t look like much on the chart, but with short-dated options contracts, this move is magnified.
Here’s the value of the contracts we targeted:
The position gained over 100% by August 5.
My Newest Watch
The move on AMZN and the move on the SPY… I treat them the same.
One’s a stock, one’s an index, but the moves and the sentiment are almost identical.
I’m targeting spikes that exhaust themselves.
Here’s the alert I sent to traders as the SPY ripped to new highs this week…
When the VIX spikes, it shows that fear is building in the market.
That’s one of the tells I use to identify a strong upward trend that could reverse.
I also look at 50, 100, and 200 EMA lines. Those averages illustrate where the price should be trading, and an extended move away from them shows a coming pullback.
In reality, I’m not trading against the crowd.
I’m just waiting for the crowd to exhaust itself.
We can’t predict a strong move in the market. But we can identify a strong move and play the next reaction.
Don’t predict. React.
Stay Street Smart,
Jeff Zananiri
*Past performance does not indicate future results, Not typical.
