You know just as well as I do that avoiding the headline risk in your portfolio is extremely important, especially right now as the market looks to latch onto something other than the Fed.
Avoiding the headlines does NOT mean ignoring them… you just have to understand how to follow the trend so you don’t trade on false merit.
We have to be watching the headlines, understanding the implications of the news, and be aware of the trend in any stocks we are interested in..
External forces are what drive a lot of the retail investors’ trading and even some of the analyst’s decisions, but this can only go so far before the real trend of the market wins.
This is where slowing the market down really kicks your profits into high gear.
Just take a look at the recent headlines surrounding Mr.Elon Musk so you can see how a headline can hurt your portfolio – unless you know how to trade it.
When people wake up in the morning and start looking at what they missed while they were asleep, they tend to turn to the news…
It could be Fox, CNBC, NBC, CNN.
They could look at The Wall Street Journal, Investors business daily, The New York Times, ECT.
But a lot of people turn right to social media – looking at Facebook and a lot of people are looking at Twitter.
And this week that is exactly where the headlines are from – it’s all about Twitter, just check this out:
You would think that this would really only affect Twitter (and yes I know they are not publicly traded anymore).
But the thought of Elon stepping away from Twitter had the Tesla lovers in a frenzy as they felt that he will have more time to focus on his other ventures… It caused Tesla to rally.
This could have wreaked havoc on your portfolio if you were short Tesla and may have resulted in an unnecessary loss out of fear – if you
Investors’ feelings really shouldn’t be a reason for a move like this…
After all, with interest rates still on the rise, people are still spending less in the consumer discretionary sector (and I don’t know about you but a brand-new car is definitely an item that you could choose not to buy).
Headlines just turn into a muse for traders to go have their fun.
We are at a point where traders and investors alike need to find something to latch onto rather than trading the market.
They see an article and start to think to themselves ‘This is it, this is what is going to fix all the problems. It’s exactly what the stock needs
This is the reason I tell you – as much as it might not make sense at the moment – to follow the freaking trend…
The trend is your friend – it’s one of the first things most investors learn when they are starting to follow the market.
All of these shiny objects that the media wants to dangle in front of you – although they can be valuable in finding the trend – do nothing other than distract from the truths of the market.
The trends – in most cases the moving average lines and more specifically the 50-day moving average (MA50) – will not fail you… they are a calculated data set that gives you a clear direction of where an individual stock or ETF is going.
Let’s take a look at Tesla (TSLA) so I can show you how the trend has served me well:
Last week I was talking about TSLA and it is showing a clear negative trend – even in light of the ‘headline rally’
I told you to take a closer look at the January expiration with a 160-150 strike.
The stock is already well within that range.
This stock continues to abide by the bottom Bollinger Band as it rips lower and continues the trend the 20-day moving average is playing out and the stock continues to test the trend and get rejected only to go lower.
We can rest easy knowing that these headline rallies will affect the result of your trades.
And the more tweets Elon puts out – and yes, at some point this does come down to just an Elon issue – the lower you can ratchet those prices and keep profiting (until he says something that makes sense that is).
As I have explained, we are not in the business of ignoring the news – it isn’t even an option because we have to know what is going on with any company we are interested in.
But we do want to avoid the added risk of these single-day swings.
If there is a headline that seems like it would be bad for TSLA great it is just going to accelerate the trend.
If we hear something good from the TSLA ecosystem, we know there is time on our side and we don’t have to worry about a one-day pop as the trend is still in our favor.
There is a sort of beauty that comes with trading a trend with headlines around it and I plan on continuing this style as long as I am in the market. it is the best way for you to slow things down and make a logical trade and avoid distractions.
December 20 2022