CAPITULATION...
Have you ever come to a state of capitulation in your life? I mean reaching a stage that you will no longer resist or surrender to "fate". Well it can be good or bad?
Perhaps you have given in to the continued persistence of your partner to convince you to buy a new car or house.... or perhaps you have given up to the fact that you will not be able to get a new job after many interviews.
Many a time, when we are at this state, the action will turn the other way of the resistance. If you are trying something positive, don't give up... just continue to strive for the positive move ahead.
The same goes for the stock market. When all is doom and gloom, and that we may have given up that this is going to bring you the financial future and rewards, we may just be one more step before we see the light at the end of the tunnel. January 2022 has been one painful month for long term investors who have long positions in the market and a very volatile and unexpected month for traders.
However, if you take a step back and focus on a longer timeframes, you may see it differently and this may be an opportunity in fact. If you have just started to set-up an investment portfolio, it may be a great opportunity to add new positions. If you already have a portfolio, it may be an opportunity to add additional positions for your long term portfolio. Whilst, traders, may wait for the capitulation to happen to ride on to the reversal which might come.
Market capitulation is where the market has bottomed after everyone who cannot endure a selldown have sold their positions or are forced to liquidate due to margin calls. When this happen, the selling pressure stops as there are less sellers in the market and when demand is more than supply, prices will then rise again. Whilst, we cannot time the exact date when this may happen in every retracements, we can already benefit by understanding this concept as the stock market generally rise over a long term period. With this understanding, it is never a losing position if we take such opportunities to add on fundamentally great stocks.
"Be greedy when the market is fearful..."Warren Buffet"
SPX
SPX closed the week up for the first time after 4 weeks. In fact, it gives a good positive signal with a double bottom plus a bullish pinbar. Expectation would of course be bullish for the market in this week but of course nothing is certain as the market makers may also want to make our life a bit more painful before the upswing regains its momentum.
Lets see if the market intraday volatility continues this week, if it goes away and market continues to be bullish, we may possibly see the upswing going higher before we start back the rollercoaster ride in March before the first firmed rate hike commences.
NDX
This time round, the NDX retraced the most by around 18% before it regained its ground by 5% for the week. The earnings season had kicked in with a mixed set of results so far. Companies like AAPL and Microsoft was good whilst companies like NFLX had missed its subscription numbers once again and had its share price penalised by 30% to its lowest post earnings.
Nevertheless, we should see NDX recovering some grounds for the time being as the next major event is expected only in March when the first actual rate hike is expected to be implemented. Whether it will be a double hike or only a small initial hike, is still dependent on how things goes in the next few weeks.
In any case, we took opportunity to add in additional investment positions on a few stocks during this retracement and seems positive so far from the entry points.
TRADE WATCHLIST - SBUX...
SBUX price was quite constipated for the past week, moving together with the market volatility. If any trade were to be done, it will be already going to the March 18 expiry cycle, Debit spread +100C/-110P and if you do not mind investing in SBUX, then finance it with a naked put at 85. That will bring down the price of the trade lower but the risk taken will be more due to the naked put.
INVESTMENT BUY IN - MSFT...
With the good earnings result, MSFT has moved up higher already. Not likely we see it going down to 270 for time being. So we only managed to buy in one part of the position for now.
INVESTMENT BUY IN - ADBE...
The lowest it would have gone is 480 and has hit some form of resistance there with a bit high on buy in there. Guess many still thinks it is a great buy level and we also added some at 500.
TRADERS TALK
Did you hear last week's Traders Talk?
We had a great topic and so much insight on trading was given out.
Listen to Traders Talk Series 33 if you have not done so. View Past Traders Talk
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DISCLOSURES
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