The United States stock market has been feeling pressure from both sides.
Imagine that the stock market is a can of soda that is right now being shaken by both President Trump, Chairman Powell and a few other individuals with large twitter followings.
The media has really been pressuring certain ideas and opinions in the market over the last year. Looking down we can see the Dow Jones Industrial Average recover the entire move downwards that it experienced back in the end of 2018.
We started off the year at our lows and have seen consecutive growth in an uptrend over the entire course of the year. The stock made a higher high then responded with a lower high to then push once more again to a higher high for the years trend.
I enjoy listening to see what the media is telling the masses so I can understand the perception and ideas that the general investor will have in the market.
I have heard from some sides that President Trump is pushing the limits of Chairman Powell to pressure him into lower rates again. This would require for there to be a bit more corrective movement in the market for President Trump’s plan to work.
The only reason that the Federal Reserve would consider lowering rates is if they feel the market is entering recessionary trends which would require to open up greater streams of lending through lower interest rates.
There is also the other side coming from investors who are looking at the overall upwards trend of the market and are not fighting against it. They understand that there are corrective movements which require for the seller try and push price down until the buyers kick in and continue to add more cash into the market.
If we look back at the technical for the DJI we see price being bottlenecked into this area based on the wicks of the overall current trend.
This again is just a simply analysis that I have done on the DJI using trend lines to give me a better understanding of where price is currently trading within.
Trend lines are not always perfect and there is really not a right or wrong way to draw them. Using trend lines on your charts helps create a better visual of where price is respecting.
Why is this so important?
Well when we are trading stock, currencies, crypto we need to understand the story behind what we are trading. Part of the story includes defining the parameters that which the stock has traded within.
For example if UBER is currently trading at $32.5 we need to first look back at the 52-week high and low of the stock. This tells us directly what the overall trading range has been over the last 52 weeks or one year.
The 52-Week range is 32.04-47.08 and can be found in the center column of the image above. Now if you notice that the 1-year change is N/A this is because UBER is still a very new stock in the market and only came out this year back in June 2019.
Now I am not going to tell you to not trade Uber although if you wanted to trade a company that has more history behind the company that will provide for more data to process when deciding to make an investment in a company or not than find a company that has been publicly traded for somewhere around lets say 5 years or more would provide more history.
If we were to decide to draw some trend lines to understand where price is currently at and where it has been before then start at one of the peaks at the top and drag it over until it lines up with at least 2 or more touches. This will validate the strength of the trend line.
Not all trend lines need to be pointed in the same direction. I personally often find myself adding trend lines that cross each other on my charts. This for me signals an area where price is being pushed towards by the support and the resistance of the technical aspect. I watch these areas precisely as there are key areas to identify break, test and reject trading strategy.
For more on how enter trades based on the Break, Test and Reject confirmation strategy click the Image below.
Stay on Your Feet
The market has certainly been a chopping one with very sharp and short movements. These types of market conditions can be very difficult to trade even for veteran investors. There are so many factors that are currently at play that it can often be very overwhelming.
This is part of the reason I only focus on aviation stocks. I understand the aviation industry from it being a major passion in my own life and from my experience working with private aircraft. Trading primarily aviation stocks helps me keep a focused view on the factors that can directly affect the specific industry.
As I am focused in just one sector primarily it allows me to be more present in what is currently goin on that I should be aware of. If for example I was personally actively trading options in biomedical industries, energy, financial service companies I would be so overwhelmed with all the information to process that I would be missing trades or holding on to losing trades.
Being that this market is currently so hard to follow stay flexible with your investing strategy. Understand that the market can flip on us in any moment and its important to be ready to adapt to whatever the next move is.
Part of becoming a successful investor required not just being able to click a button and walk away for 20 years. It involves having adaptive and flexible and allocating your capitol to generate to greatest potential gains for your situation.
Stay tuned for this weeks updates as the rising pressure can certainly bring a reaction.