M for Murder, V for Victory
Welcome to today’s Rude Awakening…
And welcome to a market shift… (potentially).
Jobless Claims Jump, Market Falls
Almost 900,000 jobless claims were filed last week, overshooting the projections by a long shot.
We obviously still have problems in the economy due to the coronavirus pandemic, and the ripple effect it’s had.
And now, after all the pushing the market has been doing up and up over the past several weeks…
We’re seeing a correction at market open.
The topic for today is…
In analyzing the markets, we see double bottoms and double tops.
Investopedia gives us a simple definition for this:
A double top is an extremely bearish technical reversal pattern that forms after an asset reaches a high price two consecutive times with a moderate decline between the two highs. It is confirmed once the asset’s price falls below a support level equal to the low between the two prior highs.
In this case, the asset is the S&P 500.
Looking at chart patterns, the saying goes, “V is for Victory, M is for Murder.”
If you remember, I’ve been talking about the V pattern we were seeing in the marketplace. This was a bullish indicator that would imply the market was correcting to the upside after a downward trajectory.
Now, the chart pattern is taking an M shape…
You can see where I’ve lined up the crosshairs to show that double top.
We are seeing this same pattern across all the major markets: the S&P, the Dow, the NASDAQ, even the small caps Russell 2000.
Are we in for a downward move in the marketplace?
It certainly looks that way today.
The question is, will we break down below the 50day MA once again?
Looking at the Monsters of Tech
We of course want to check out the Monsters of Tech, the stocks that lead the NASDAQ and the overall marketplace.
They are all down today.
But, that doesn’t mean we can’t trade them!
In the Rude Awakening Pro, we set up a high POP, bearish trade on Amazon.com Inc (AMZN), for implied returns of 3% in just one week, or 160% annualized returns.
It’s a trade that stands to make money whether the stock falls further, middles out, or even goes up somewhat.
We did this using options.
If you want to learn more about our Pro level trades, you will be able to sign up for our Rude Awakening Pro service very soon…
But for now, that’s it for today!
Have a great rest of your trading day, folks.
We’ll talk again tomorrow…
Editor, Rude Awakening