Monsters of Tech SELLOFF

Welcome to Rude Awakening for Thursday, December 10, 2020.

Recording for you last night, we saw a futures market down across the board, on the NASDAQ and the S&P.

And now, with the market open about 2 hours so far today, things are still looking pretty flat.

All the major indices are either up a little bit or down a little bit, half a percent move or less in any direction.

With that, here’s the real story for today…

The Power of the Downside Hedge

I want to talk more about the idea behind some of the opportunities I showed you yesterday: making money on the downside.

We don’t have to look much further than the Monsters of Tech: the FAANG stocks and TSLA.

These are the ones that have allowed the NASDAQ to shoot up, and so go the S&P and the Russell 2000.

Yesterday, however, we saw a big reversal in some of these major drivers of the markets:

AAPL, MSFT, AMZN, GOOG, FB, NFLX, TSLA all down yesterday.

As those tech stocks fall, so does the rest of the market.

To see where things are headed, we are looking closely at action in the S&P 500 today.

Yesterday, as you can see from the chart below, we had a big down day for the S&P futures, with a bearish engulfing candle.

IMG 1

Obviously this kind of candle is a major bearish indicator. The jargon means we opened strong on the day, with an expanded range higher than the previous day’s high, and then we continued to sell off throughout the day.

This was the opportunity for buyers to come in on lower price action. This has been a “buy the dip” marketplace, as you can see from all the other down days followed by higher highs.

But, as we can see, yesterday’s was a dip that was not bought.

This is the first time the dip hasn’t been bought in a very long time.

We don’t know what this means for the longer term…

But it means this is a great opportunity for bearish trading opportunities, looking for profits to the downside.

And that’s it for today, folks.

We’ll talk tomorrow!

Regards,

Scott Stewart

Scott Stewart
Editor, Rude Awakening

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Scott Stewart

Scott Stewart has been trading for decades. He has acted as an analyst and educator on the stock market for just as long. As your Rich Dad's Weekly Cash Flow analyst, Scott works tirelessly to ensure you know everything you need to do when entering into new positions, and adjusting trades as you go along....

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