A week of uncertainty in the banking stocks finished off with more bad news on Friday…
This came after headlines went back and forth all week from the perceived positive news that the government would insure depositors in SVB Financial Group (NASDAQ: SIVB)…
To the negative headlines of the potential failure of Credit Suisse Group AG (NYSE: CS).
We received good news that JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Morgan Stanley (NYSE: MS), and more were depositing a combined $30 billion into First Republic Bank (NYSE: FRC) to help shore it up against potential failure on Thursday.
However, things started to turn sour again on Friday. The $30 billion cash injection failed to impress traders.
This is why I said to avoid these “newsy” stocks and the sector as potential dip buys or shorts last week…
They were in play and volatile … But there were too many risks…
Headlines can change from day to day and minute to minute as I just explained.
And instead of playing guessing games and being at the mercy of news reports and politicians — you could’ve traded another sector that was in an uptrend all week…
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A Crucial Skill To Work On Today
If you were looking to dip-buy bank stocks and swing them for a profit — there were better opportunities out there for that strategy…
Tech stocks rallied last week…
Big names like Alphabet Inc. (NASDAQ: GOOGL), Microsoft Corporation (NASDAQ: MSFT), NVIDIA Corporation (NASDAQ: NVDA), and Advanced Micro Devices, Inc. (NASDAQ: AMD) all had nice moves over the last five days.
Check out the charts…
Now compare those to the five-day charts of some of the beaten-down bank charts…
What do you notice?
First, I see four tech stock charts that are all in an uptrend…
Then I see three charts of beaten-down stocks that have no clear direction.
So if you want to take advantage of upside moves by taking a long position, which stocks do you think would offer better trade opportunities?
The stocks that are in an uptrend…
These are stocks that make higher highs and higher lows and are generally moving higher.
As opposed to stocks that are in a downtrend — making lower highs and lower lows. Or choppy stocks that have no clear direction, they just have random up and down movements.
This is a crucial lesson for new traders…
You must know how to recognize trends.
It doesn’t matter if you trade large-cap stocks or penny stocks…
When you take a long position, you want the stock to go up to your goals so you can take your gains.
But if you waste time and money in choppy stocks with no direction, you’ll end up with a bunch of paper-cut losses and frustration.
Read this past Daily Accelerator issue to learn more about trends.
And consider reading some of my favorite books on trend following and chart analysis…
- “Technical Analysis Using Multiple Timeframes” by Brian Shannon.
- “A Complete Guide To Volume Price Analysis” by Anna Coulling.
- “Trend Following, 5th Edition: How to Make a Fortune in Bull, Bear and Black Swan Markets” by Michael W. Covel.
Cutting out random trades that result in losses can be one of the best things you do to get on the path to becoming the trader you want to be.
That can start with focusing on stocks that are in a trend.
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I’ll share what I’m watching, the key levels to help you make trade plans, and what I see in the overall market to help you make better trading decisions.
Have a great Money Monday, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade