This is a followup to my earlier blog post on Bull Market Is Back! In this follow-up video below, Adam shares what might happen in next few weeks and also what we can do. Personally I have already vested in both upside and downside for some of my stocks prior to this video. Hence, I am also interested to see how this will pan out.
Disclaimer: But please note that this article is not an recommendation for you to buy or sell any stocks. You need to do your own analysis and take your own decision based on your current skills/experience level. I am just sharing this as more of an educational insights of what’s happening in the market amidst all this COVID-19 situation. I have been trading for more than 20 years myself.
The Bull Market Stock Strategy Playbook
Official definition from DOW Theory that a Bull Market is formed when the stock market is 20% above from the low of market. And this has already happened on 12 Apr 2020. Note that this is despite the economy current state (ie. risk of going into recession). The economy is independent from the stock market as the stock market is often a leading indicator of the economy 6 to 9 months ahead. Do bear this in mind.
As of 20 Apr 2020 which is the time of this blog post, the market is at 31.3% rise then its bottom on 23 Mar 2020
SPX is currently at 2874.56
It’s bottom was at 2191.86
SPY is currently at 286.64
It’s bottom was at 218.26
Hence based on definition, the bear market in stocks is officially dead and the new Bull Market in Stocks has negun with the S&P 500 rallying more than 20% from its lows. In this followup video, Adam shares how he manages his stock investment portfolio and his strategy to generate profits under different stock market scenarios.
Watch how he use Put Option spreads to generate profits if the stock market moves lower in the short term. Personally, I have also placed put option spreads but at a different entry point from Adam. I guess I have a lower risk capacity than Adam. So you should read this and adjust based on your own experience and risk profile.
These are essential strategies for stock traders and investors who want to improve their investment and trading performance.
Key Points From The Bull Market Stock Trading Strategy Playbook
Below are the key points from the video that you must be aware of to cover the different situations that might happen. You need to adjust this based on your own trading portfolio and your own trading experiences.
Note that SPX is at 2874.56 as of the time of this post. Please see the chart below of SPX.
Using the SPX for analysis (as at 12 Apr 2020 in the video above), there are 2 possible scenarios that might happen.
Scenario 1: Bull market continues (this is happening at time of this post)
Using Fibonacci retracement study, we look at the following 2 levels:
50.0% level is at 2638.83
61.8% level is at 2589.57
Currently SPX is above both levels, hence, it is time to consider buying more good quality stocks. For me, I have entered into SPY calls and will be closely monitoring the market for possible turn.
Scenario 2: Bear market comes back for second round (this is not happening at time of this post)
Using Fibonacci resistent study, we look at the following 2 levels:
61.8% level at 2933.49
50.0% level at 2791.74
If SPX touches 2458.24 (which is previous low) after breaching the levels, then consider the following actions:
1. If it will go below this previous low, it will become bear run. Don’t despair, just try the Put Spread Option to profit it. See video for suggested actions. But do take your own analysis.
2. If it bounce back up, check on it further to confirm if it turns in Bull market again (see scenario 1 above)
That’s it. All the best to your trading success.
To your success,
P.S. If you are into other passive incomes streams, read our post on those areas as well.