These Countertrend Trades Are Not for the Faint of Heart

What was going on technically when the market was good. What constitutes a bullish chart? For me I'm looking at pattern first. If the technical pattern on a daily chart was showing me a pattern of higher highs and higher lows, that was considered a bullish factor. When price was clearly above the 200-day simple moving average and the 50-day simple moving average, that was a bullish factor. When the 5/13 exponential moving average combo was also in a bullish mode, with the 5 ema above the 13, that is considered bullish. This is mostly what we were seeing in the markets into early 2020. That's when buying the pullbacks was the way to go. As you've noticed, this has all changed. Many of the stocks and indices are showing the exact opposite pattern. We have prices below the 200 and 50 simple moving averages and the 5/13 ema combo is in a sell mode. We also have more clear patterns of lower lows and highs. So should we keep it simple and forget about buying stocks until the patterns are bullish again? Or at least when the 5/13 ema combo shifts back to bullish? For some, this is probably a great idea. For active traders, however, there will still be some opportunities on the buy side with some countertrend trades. But if you are not a nimble trader, this won't be the way to go. For example, we saw over a $300 rally in Amazon off some key time/price parameters, but the low was within a very clear downtrend when the low was made. These opportunities do exist, but since the charts are not bullish anymore, you have to be prepared to use a trailing stop and exit when it stops moving in your favor. The first chart below, of Apple , shows you how helpful the 5/13 ema combo can be helpful. Note where the 5/13 turned back down, not far from the last major high. Also note it has NOT yet suggested a longer term buy entry yet as the 5/13 combo has NOT yet turned back to the upside. The second chart is the daily chart of Amazon . This is the example I was talking about, where a $300+ rally was seen, even though the chart was quite bearish. So if you have the patience to wait in this market, at least wait for the 5/13 ema crossover on a daily chart to the upside to be a buyer. If you're more of a trader and shopping for bargains, however, here are a few stocks that are holding on top of key MONTHLY support, though we're not yet seeing indications that a good low is in place. As usual, I will suggest that you use buy triggers before making entries, but if you do not, at least define your risk below the zones on the charts. To learn about triggers, please watch the videos below. Caterpillar $ on the monthly chart has a key support decision at the $85-$87 area. There is also potential support at the $75-$81 area. I'm wrong on this setup if we break the support. Dollar Tree on the weekly chart has key support that is holding so far at the $57-$61 area. I will stop looking at buy triggers if this zone is violated. IBM is another one that has been brutally beaten down and I'm showing potential support at the $91-$93 area. If price can hold above this key area, I'm willing to take my buy signals and defined my max risk below the $91 area. Hang in there everyone, we are living in extraordinary times here. If you need help with TRIGGERS, please watch this video. If you would like to learn more about my trading methodology, please watch this video.

These Countertrend Trades Are Not for the Faint of Heart

For active traders, there will still be some opportunities on the buy side with some countertrend trades.

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