Bull Vs. Bears — Stock Market Analysis

As we moved into the first full week of the month of February, we began with a continuation of the strong bullish move that began at the end of December. As we ended the week we saw a bit of a bearish sell off as the market is beginning to fear the trade war with China might get worse before it gets better. As the bears come into the market we will want to look for opportunities to take trades with stocks that will be selling off. This means we can look to short the stocks or buy put options on them.

Regardless of what happens, it is important to make sure we are using good risk management in our trades. Consider how much you are willing to lose per trade as well as how much you are willing to lose across all your trades. Keeping your risk at an appropriate level will help you maintain the confidence you need as you trade.

Let’s take a look at how the markets performed this last week.

DJ-30:

Image for post
Image for post

On the daily chart of the DJ-30, you can see the last 3 trading sessions where the price has moved lower. Also, notice how the price is pulling back to the point of where it recently broke through. This break of resistance is an area where we can see price move up from or reverse from. Currently, we are testing this area to see if it will break back down or if the buyer will jump in and pus price higher once again. The next significant level on this chart will be trying to take out the prior high level. Going into this next week, we are going to watch and see if the prices will drop below this support level (old resistance) that is drawn on the chart

SP-500:

Image for post
Image for post

On the daily chart of the SP-500, you can see a similar pattern to what we saw on the DJ-30. The price here is also pulling back and sitting right on this line that it broke through earlier this week. This will also be a significant area if it cannot hold and price begins to run back down. Just like any strong area of support or resistance, once broken it will become the new area to look for the opposite. What this means is old resistance can become new support and old support can become new resistance. We will see what happens this next week.

NASDAQ:

Image for post
Image for post

While the charts of the DJ-30 and SP-500 just barely broke the overhead resistance, the chart of the NASDAQ has had a couple of week trading above it. While we see a similar pullback in price, the area of support is well below where it is currently trading. A break down on the other charts may lead to a strong pull back to the area of support in the NASDAQ. We can also look for the 50-period simple moving average to act as some support as price approaches it.

We will continue to monitor the markets to see if the bulls or the bears begin to take control and push prices in one direction or the other. Whatever happens, make sure you are following good risk management rules as well as follow your rules for entering and exiting your trades.

About Bill Poulos

Bill Poulos is an enthusiastic trader, published author, retired automobile executive, and a philanthropist. In 2001, Poulos and his son, Gregory Poulos, co-founded Profits Run, Inc. The company reviews investment strategies through financial publications, investment software, online courses, and coaching. Profits Run has helped thousands of individuals around the world make better investments while minimizing risk. Poulos shares his expertise on trends in the markets by contributing to Investing, LinkedIn, Yours.org, and here on Medium. Bill and his wife, Karen, have raised three boys. They live in Wixom, Michigan.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store