The S&P 500 popped 1.1% Thursday and is up 8% in three weeks. (Trade that with a leveraged ETF and the profits are spicy!)
Three weeks ago investors were cowering from spiking Treasury yields. Now I cannot even remember the last time I saw an article mention Treasury yields. But that’s the way this always goes; buy the fear and sell the relief.
As good as this trade has been, only a greedy fool expects the index to surge another 8% by early May. I’m not suggesting people rush out and sell everything because “stocks are too high!”, but I am saying we need to be far more careful following a nice, one-direction run like this. (Everyone knows stocks move in waves.)
Keep holding for higher prices but move up our trailing stops and consider locking in some profits proactively if the index stumbles into the close on Friday or early next week.
Wednesday was an awful day for Tesla (NASDAQ:TSLA) and things were only marginally better Thursday. The stock popped early Wednesday and challenged $800 resistance, but rather than chase prices higher, investors hit the sell button and the stock ultimately finished down 4%.
While I’m not going to give up on this stock because of one bad day, but this intraday fizzle was a huge warning flag. The important thing is the stock stabilized Thursday and the selling didn’t continue.
Everything is fine as long as TSLA remains above $700, but lock-in profits if this retreats under $700 because the selling won’t stop until it hits $600 support. (The most aggressive trader could short a violation of $700 with a stop just above this level.)