Yesterday, the S&P 500 melted up and moved toward all-time highs.
Then earnings hit…
If you jumped in early, you got swallowed by sellers.
It might seem too easy to lose money in this market. But a loss like that rarely comes from a bad chart or a bad stock pick.
It comes from something else entirely.
There’s one part of trading that’s harder than everything else. It’s harder than studying charts. Harder than digging through earnings reports…
During my live session yesterday, I asked traders what the hardest part of trading was. Their answer came close: “losing money”.
The funny thing is, the hardest part about trading is often the very thing that keeps us from losing money.
And yet most traders can’t stand it.
This is the hardest (and most crucial) part of trading…
The Hardest Part
During my live session, I compared trading to golf.
Down here in Florida, the best time to play is 70 degrees, light wind, and a few clouds in the sky. The worst time? 40 degrees in a thunderstorm.
Nobody plans to play in a thunderstorm. But some golfers go out anyway, because they’re sick of sitting on the couch.
Traders do the same thing.
Right now, the S&P 500 ETF Trust (NYSE: SPY) is stuck between roughly $760 and $780. Yesterday it made a run toward all-time highs, and earnings from META knocked it right back into the range.
That’s the thunderstorm. So what’s the hardest part of trading?
Waiting.
Waiting feels like we’re doing nothing. But it’s what keeps us off the course when the lightning is out. Most bad trades happen because traders get tired of waiting and jump in when they know they shouldn’t.
So what am I waiting for?
Confirmation.
With the VIX above 18, the market isn’t sure how to receive news. Good earnings get sold. Bad earnings get sold harder. Until the SPY breaks out of this range and holds, I don’t have confirmation.
But waiting doesn’t mean I’m looking away.
While I wait, I keep a watchlist.
My Watchlist
When the market drops, I look for stocks that can shrug it off. I call them relative outperformers.
Here’s what I’m watching:
Apple Inc. (NASDAQ: AAPL): While the SPY sold off, Apple went sideways. That’s strength. I’m watching for a breakout to new all-time highs or a pullback for a cheaper entry.
Cisco Systems Inc. (NASDAQ: CSCO): This stock is double bottoming off $105, and it’s holding up while the market drops. Above $108, roughly yesterday’s high, I’m eyeing the November 20 $115 calls. A pullback near $106 would be an even better risk/reward. But a close below $105 breaks the setup.
Netflix (NASDAQ: NFLX): This stock looks overextended after earnings. It’s 2.7 ATRs below its mean, with a gap overhead. Charts love to fill gaps.
Walmart (NASDAQ: WMT): This stock double-bottomed a few weeks ago, then put in a higher low. I don’t chase extensions, so I want a pullback before I play this bullish price action. I’m also interested in a breakout and a bounce off the previous highs.
Meta (NASDAQ: META): Meta dropped after earnings, and it could be entering an overextended range. I’m eyeing $700 or $750 calls, maybe a spread, for a longer-term bounce.
None of these is a trade until the chart confirms it. Set your alerts and let the price come to you.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
