Trade idea: SPY

We know that it is a difficult time to buy stocks with so much bearish news and frankly, chaos reigning in markets. However, the market is showing signs of heavy capitulation. We won’t go into all the stats that are showing signs of extremes, but here are a couple

As shown above, the fear and greed index is at 1. This is not something that happens very often.

Another statistic signalling a high probability bottom, is that we have had 5 days out of the last 15 where the NYSE up volume ratio was below 10%. This has only happened 8 times in 60 years before the most recent signal, and it has historically resulted in 86% positive returns 2 weeks later.

The weekly chart has the 200 week moving average at 2640. This is the same level we bounced off in 2018.

Action to take would be to buy the S&P 500 by making use fo the SPY ETF as it breaks 2640 index points (or $264 on the ETF) towards the upside. Alternatively for those looking to be more aggressive, a buy at 2600 index points (or $260 on the ETF) can be activated with a stop loss 5% lower. 

Thus, using the SPY ETF, the trade is to buy at $264 with a 5% stop on it, at around $250. Be warned though that this is a high risk, high reward trade. We want to encourage you to trade small and manage risk as strictly as you can.

*Please note that these trade ideas form part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.

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Every week needs a new plan!

Markets change all the time. New fundamental drivers emerge, technical setups mature or fail and our trading plan must adjust in order to keep up with the ever changing environment. Every week we highlight some of the trade ideas that are generated within our client community so that you can stay on top of what we're looking out for and planning to trade at the beginning of each week. 

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