The market sold off this week only to rally into the close. When an instrument prints near the high of the day at the close, this tells me two things. Firstly, the market is bullish (at this moment). And secondly, those holding long positions are bullish enough to take the overnight risk. Over a Bank Holiday weekend, the close is even longer.
What does this mean for the long term? Nothing. All we can gain from this is that in the short term the market is long.
It’s important to remember that everyone’s timeframes are different here. You may be a long-term investor, or you may be a trader – either way, it’s possible for two people to have a completely different opinion and both be right because their timeframes are different.
An intraday trader only cares about the trend within that session. A swing trader may only care about the trend for a few days or weeks. A long-term investor may not care what price they buy at now because they’re confident in their analysis that in three years the price will be much higher.
There are often arguments on Twitter about various stocks. Very often these can be settled by acknowledging the time frame is different.
Over a long enough time frame, I’m a perma-Bull. I believe that no matter what happens in the UK, companies will innovate and build value for the shareholders of those companies. Despite the pandemic that is sadly going to continue to plague the country, life will go on. In the fullness of time markets will be higher.
For a trader, it’s important not to get too attached to any opinion. With increased market volatility comes the increased likelihood of finding oneself offside on a position. It is much better to be wrong and keep your money rather than stay wrong.
I’m net long at the moment, though it is possible to be short in an uptrending market if you’re short the right stocks. However, in a market bounce the best trades can be long trades as we have seen with WMH (mentioned earlier in this column).
I’m on the lookout for shorts, because my opinion is that we see another leg down at some point. I thought that last week though, and instead I found myself getting longer over the week. This is…
.jpg)
