With bullish setups continuing to climb this week, I like the cushion this gives me to continue putting on some bearish bets to help smooth out any possible portfolio volatility that may be on the horizon.
Today's bearish "hedge" is a short bet in a technology name that is most definitely not keeping up with its peers.
Many swing traders and investors are currently sitting on a First Class problem. But it’s a problem, nonetheless.
These traders are sitting in positions with huge open profits.
I can use NVDA as an example. But there are many, many big winning trends still acting well.
Those of us who like to style ourselves as Trend Followers will soon be faced with a difficult decision – how and when to determine when a trend has ended.
It’s easy in hindsight to look at a chart and spot the moment a trend was invalidated and an optimal exit price is clear. But in real-time, it’s not so easy. In fact, it’s impossible. Because contrary to popular belief, no trader can reliably and consistently predict the future.
But the stakes are high in these moments. For a trend follower, the occasional big wins are what we rely on to make our nut.
The life of a trend-following trader can best be described as long periods of near-constant frustration punctuated by short moments of fleeting bliss.
Today's trade is in a steel sector name that recently poked its head above a resistance level that had been capping the upside for over two years now.
As the stock consolidates its recent breakout, options premiums are quite low, offering us the opportunity to position in some longer-dated calls for a simple bet on higher prices.
One of the things I’m trying to be better at this year is letting my winners ride.
In the past, I would often look to reduce my open risk in a winning trade too quickly because I was fearful of giving back hard won gains. I would let my emotions or my PnL dictate when I should exit a portion of a winning position.
Letting my emotions dictate anything is often a recipe for disaster – certainly for me.
Emotions are not an objective reason to exit a trade. We need to let PRICE tell us when our trades are invalidated or vulnerable. Price doesn’t lie, but emotions often do.
Healthcare continues to lead to the upside. While we already have a bullish bet on a sector ETF, it's time for us to drill in a little deeper in search of more beta if this trend is going to continue.
Today's trade is in a name that has been performing great off its December lows and has also been in a longer-term bull market. But only just recently has it begun to outperform against the broader stock market.
As many of our longs continue to work in this current leg higher in the stock market, I like putting on bearish bets as portfolio hedges to cushion the blow if/when the turn comes.
And the best way I know how to do it is to position bearishly in stocks that are already falling. If they are performing poorly now, I have to believe there is a lot more downside should a downdraft hit the broader market.
My analysts published their latest Short Report, and one of the names caught my attention.
Perhaps the title of this post is a bit dramatic. But it got your attention, yeah?
While the indexes continue to plow higher and higher, proving markets can stay irrational longer than bears can stay solvent, there continues to be signs piling up that a turn may be near at hand.
We're not saying that the long bull market is coming to an inglorious and permanent end. We're more of the belief that a well-deserved pause and/or pullback feels like a perfectly natural thing to happen somewhere around here.
So we're going to add another bearish bet to the board in a stock that is already showing signs of topping in a sector that might be ready to roll over.
— Sean McLaughlin, NLD 📈 ( formerly @chicagosean) (@OptionsSean) February 5, 2024
Today on The Flow Show, me and Steve Strazza chatted about the current $VIX environment, the potential for sideways, volatile trading action, and our internally diverging views on the overall market (JC is getting more bearish, Strazza is still flying the Bull Flag, and I'm closer to Switzerland).
As we dug into it, Strazza floated a couple ideas in the Healthcare space that made sense to me once we fleshed it out.