After a couple of weeks of trendless, choppy markets — the low-volume lead up to Thursday’s holiday — the breakouts are giving way and finally showing us a few of those cracks that drive bears wild.
Monday’s re-nomination of Jerome Powell as Chair of the Federal Reserve drove traders wild at the open….
But then the big funds had to unwind the hedges they’d put in place in case the more dovish Lael Brainard had gotten the nod.
That sell-off sparked a downtrend that’s dropped the S&P 500 about 1.5%, and the Nasdaq 2.8%.
Veteran and casual traders alike need to be careful because I haven’t seen the market hold a minus-800 tick like this for months…
As rough a ride as it is, only time will tell if the trend holds past the holiday.
It might sound strange, but a 5% to 10% correction would be a good thing….
Low-Volume Breakouts: Why Traders Need a Target
We haven’t hit real selling yet… If and when it shows up, it will be easy to spot.
For those who haven’t seen the market tank in person, it’s an experience.
Because when stocks go down — they go down aggressively. As they say, stocks take the stairs up and the elevator down…
That cascade of selling sends volatility through the roof, which spikes options prices.
Compare that to when stocks make a timid crawl to the upside, which causes volatility to leak right out of options premium.
We need that volatility to create profitable opportunities when you have no upside price levels to break toward.
Once you break above those targets, the price discovery game tends to shift from being aggressive to cautious.
Traders are just hoping the stock continues to rally… And that’s usually not a good position to be in, especially when you have a low-volume market and then a breakout.
So right now, we need to trade small, be nimble and even set limit orders for profit targets. Because there have been loads of blink-and-you-miss-it breakouts all over the markets.
Check out the video below and I’ll break down these low-volume breakout patterns we’ve seen in names like Macy’s (NYSE: M), Rivian Automotive Inc. (Nasdaq: RIVN) and Advanced Micro Devices Inc. (Nasdaq: AMD).
I’ll also show you two stocks I’m eyeing for a breakout as the low-volume markets start to crack!
P.S. Wall Street knows the key way to beat inflation is by trying to flood stocks that are set to outperform.
It just makes sense…
But what if I said there’s a way to uncover those stocks before the giant surge?
Well, thanks to this stock market trigger that’s already allowed me to lock in winners like 36.92% on APTV in seven days… 53.66% on PWR in four days… and even 83.87% on ALB in six days….
Everyday traders can follow along now!