Happy Tuesday, tradersā¦
Jeff here.
Unless youāve been living under a rock, youāve noticed the market has been getting smashed all month.
But then, last Thursday, unexpectedly strong earnings from Alphabet Inc. (NASDAQ: GOOG) and Microsoft Corp. (NASDAQ: MSFT) saved the day.
This is clear evidence that big tech earnings can move the entire tape.
Like Iāve been saying for the past few weeks, I think there will be a battle of market sentiment during the April earnings season.
We keep flipping back and forth between two cross-currents of fear:
- Geopolitical fears, which have subsided a little bit recentlyā¦
- Inflation fears, which have not subsidedā¦
Now, we have a MASSIVE week ahead of us as earnings season comes to a head.
After todayās closing bell, weāll get numbers from Amazon.com, Inc. (NASDAQ: AMZN) and Advanced Micro Devices Inc. (NASDAQ: AMD) ā two of the most consequential stocks in the market.
Plus moreā¦
Embed: https://twitter.com/eWhispers/status/1783856953149526346
And as a cherry on top, weāve got the Federal Reserveās policy meeting tomorrow.
All this to say, I expect some enormous moves over the next few days, and I have some very specific advice to help keep you safe during this earnings volatility.
With that in mind, letās get to my Tuesday Market Outlookā¦
Why You Must āShrink the Gameā This Week
First and foremost, you need to be more disciplined and conservative when trading a week like this one.
When you come into this kind of market ā one with huge external news flows happening on a 24-hour cycle ā itās time to shrink the game.
Itās easy to get emotionally overwhelmed in a market like this. When the news cycle is moving this quickly, it can be difficult to follow everything diligently.
But missing one key piece of news in this tape could make you less efficient, less accurate, and more prone to human error.
Trying to come up with a long-term prediction based on the fundamental picture is extremely difficult to do right now.
Thatās why you want to shrink the game, protecting yourself from one bad decision that leads to a brutal loss.
Some traders will try to be heroes in this tape and get even more aggressive as volatility is ramping.
But make no mistake ā most of those traders will get destroyed.
As TLC famously sang, āDonāt go chasing waterfalls.ā
3 Easy Steps to āShrink the Gameā
You may be wondering how exactly you can āshrink the gameā¦ā
Here are three ways to do it:
Tip #1: Donāt Overtrade
My first piece of advice is to avoid overtrading in this tape.
Some traders feel the need to make a trade every single day.
But this is a fallacy. The stock market is constantly changingā¦
If you’re sticking to a consistent strategy, you should be selective and discerning.
Overtrading can lead to some of the worst trades in your career, as it can be mentally taxing and cloud your judgment.
When there are no slam-dunk setups available: exercise patience, like a zen master.
However, when the right setups arise: act quickly and decisively, like a samurai warrior.
And my next tip will help you avoid the temptation to overtradeā¦
Tip #2: Narrow Your Watchlist
If youāre finding yourself tantalized to trade subpar setups, do the following:
Focus on a small handful of stocks you trade the best ā the ones that consistently make the most money ā and you’ll have more than enough opportunity to profit in those names.
By giving yourself limited options (excuse the pun), you can focus on the best setups only.
That way, when one of those stocks makes the move youāre looking for, youāre more likely to see it in time and capitalize on the play.
If youāve got 30+ tickers on your watchlist, are you really gonna notice the best move right when it happens? Probably notā¦
But if you keep your list small and selective, youāre far more likely to identify actionable plays immediately.
And your watchlist isnāt the only thing you should keep small during this unpredictable weekā¦
Tip #3: Smaller Positions
Last, but not least ā¦ you should size down your positions this week.
Smaller positions can give you more wiggle room to make mistakes (especially if youāre trading a small account).
The most important thing is that you go on to trade another day. Never risk more than youāre willing to lose.
You can always add to a winner (which is much better than cutting a loser).
I canāt tell you how many traders Iāve seen blow their entire careers on a few poorly-sized trades.
And with implied volatility (IV) elevated and price swings exaggerated during earnings season, this is even more important to consider right now.
Shrink the game, keep it simple, and narrow your focus.
Happy trading,
Jeff Zananiri
P.S. Iām seeing another EXPLOSIVE catalyst that I havenāt even gotten to yetā¦
TODAY, April 30 at 12 p.m. EST ā¦ Iām going LIVE to break down this URGENT market catalyst from one of the market’s biggest tech names, and why itās set to launch a domino effect of explosive moves over the next week.
Donāt miss my EXCLUSIVE LIVE SUMMIT ā Click here now BEFORE ITāS TOO LATE.
