What We Swing Trade in Uncertain Times

 

Here is one example of what we swing trade in uncertain times.  Sudden high volatility can shake you out of a lot of trades but sometimes everything aligns well for a less risky, solid trading opportunity in the market turmoil.

 

Last week we talked about the possibility of the Fed stepping in with a backstop for Silicon Valley Bank and other troubled regional banks to contain potential contagion.  Well, the Fed and treasury just did that with an implicit guarantee to all depositors and allowing banks to value assets at par rather than marking to market when borrowing from the Fed.

 

Other large banks made a deal with another troubled regional bank late in the week to shore up their deposit base to help avoid another bank run.

 

What to Swing Trade in Uncertain Times

 

One question traders ask at a time like this is where do I look for my next trade if there are major headlines that are making many investors anxious?

 

Here is one idea that we brought to customers attention last Monday in the Weekly Alert service and why it is working.

 

One of the best performers during a market scare is gold.  One thing we noticed the prior Friday was that gold was starting to double bottom after a pullback that lasted several weeks.  This pullback occurred after the price had a nice run back above the 200 day moving average.

 

Gold and gold stocks can move a long way once a rally really gets going.  We could see the volume pouring into the GLD (etf that tracks the price of gold) the prior Friday and our entry trigger was a move above the center point in the double bottom with some follow through – the classic entry point in the pattern.

 

A massive volume increase with some follow through the next day is what gave this trade the nod for the service.

 

GLD was our top opportunity last Monday as you knew many were skittish of bonds and interest rate risk and stock market volatility.  Suddenly, keeping money in cash with the limit of cash protection on deposits was suddenly an important consideration also.

 

So what did investors do?  Put more money in gold, of course.

 

Unlike bitcoin, gold has a very long-term performance record going back many decades.  Gold tends not to crash 30% or more within a few days like crypto.  So many people with a lot of capital are going to choose a less volatile asset like gold.  Especially during a tumultuous moment when the 2nd largest bank failure in US history occurs within 48 hours with more bank failures likely to come.

 

Fed easing is likely to come soon which generally helps a gold rally as well.  Gold sometimes goes into rally mode for years.

 

Gold Swing Trade Result

 

The GLD reached the entry trigger soon after we featured it last Monday.  We have already took a little off and raised our stop to lock in a profit as discussed in our swing trading primer.

 

Here’s the chart and double bottom breakout on enormous volume.  Volume continues to grow several days after the entry in the double bottom.

 

 

Charts courtesy of StockCharts.com

 

 

This could be a very large A-B-C up pattern into new highs for gold.  Silver may be next as it carves out a pattern similar to the bullish inverted J pattern.  The volume has been monstrous in both the metals and many of the gold and silver stocks.

 

Of course, a lot of long trades are going to hit their stop when you have a sudden banking crisis within a couple days.  We took off one of our favorites off, LNTH, on news of the regional banking crisis for a small loss.  It later hit the stop before rebounding strongly with the Nasdaq late the following week.  Bear markets will have more shakeouts like this.

 

How to Trade in a Tough Tape

 

A lot of high risk/high reward opportunities are coming up in the banking space.  However, a buyout, sudden bank run, or regulatory action could take either a long or short stop out in a heartbeat.

 

These stocks could easily be halted before the news so you would not be able to get out before a major loss on the trade.  So its a high risk venture.  This made the gold trade more attractive to us and why it was the top opportunity for the week with a paradigm shift caused by a sudden regional banking crisis.

 

So be sure to stay on top of what is trending in your direction at the time.  Even in volatile times you can normally find an industry or sector that is bucking the current market trend and maybe find a good opportunity that is less risky.  If not, cash is often the better trade.

 

 

Learn The Bullish Double Bottom Pattern