- “Buy the dip”
- “Diamond Hands”
- “Laser Eyes”
These were the die-hard philosophies in 2021 of a new generation of traders. Come hell or high water they refused to sell no matter the FUD (fear, uncertainty and doubt), and irrespective of what southern turn stocks took.
But as the bear market started to gather steam and its growl turned into a roar, the twitter pics with laser-eyes (bitcoin-fans) disappeared, the diamond hands (those who wouldn’t sell no matter how large the share price plunge), and the buy-every-dip crowd got steamrolled by a market speeding downhill.
Few traders have maintained their composure and discipline in this perilous market. Among the best who choose not to forecast but who can analyze just about any chart and quickly identify buy and sell spots is Oliver Kell, the U.S. Champion trader of 2020 with an audited track record of 941.1%.
So what is he saying now about where markets are headed?
Where Are Stocks Headed Next?
Oliver weighed in yesterday on stocks like Tesla, Airbnb and Celsius Holdings. And here’s what he had to say:
First, he commented on the QQQ:
“QQQ (had a) strong day but (is) still in a downtrend and below the moving averages. If (the market) were to trade up (I would) want to see a higher low and some setups develop.”
“QQQ 10% below 50SMA but below EMAs (down cycle). Need to see take out EMAs and put in higher low to consider longs for me. Every time (I) have paid attention to sentiment…instead of trend has got me in trouble. Market will change trend when ready…will happen when happens.”
The takeaway: The major market is in a downtrend. Unless and until it moves higher, do not forecast a low and try to pick the bottom.
This point was emphasized by another Champion trader, Mark Minervini, who stated:
“During my 40 years trading, none of my success came from picking a bottom right at the low. The low happens on one day, the bull market last for years. The big money is made spotting trends not bottoms.”
More generally, Oliver commented that the future might be quite bleak:
“Based strictly on the positioning of some names I watch…. it wouldn’t shock me if they could see much lower. Most had wedge drops, rallied into resistance, were rejected, and confirmed downside crossbacks today.”
Regarding specific stocks: Tesla, Celsius Holdings, Airbnb, ON Semiconductor, and Livent, he stated “maybe they reverse, but it seems unlikely given overhead and their weekly charts”
Trade The Trends Not The Forecasts
The more you study the best traders, the more you’ll see similar traits appear:
- patience trumps activity,
- discipline trumps guesses,
- confirmations trump forecasts.
In the words of one of the greatest traders of all time, Jesse Livermore: the money is made in the sitting. In other words, wait until the market has confirmed that the trend has changed before buying.
Above all, don’t attempt to predict when the bottom is in. Sure, you could get lucky but the best traders won’t buy until price action closes above key trend lines to signal a bullish change while the worst traders will try and fail to predict virtually every bottom.
Some lucky traders will correctly buy the bottom, but most traders won’t be lucky. The odds of making money favor waiting.