Happy Friday, and I hope today’s message finds you well! It’s my pleasure to be here with you today. I wanted to share some nuggets of experience that being a short-term trader has taught me over the years. Today, instead of delving into technicals and new trades, we’ll cover something new. I find it just as beneficial to discuss some of the things that happen to many traders and provide some perspective.

First, every trader is different. You may be a technical swing trader, a scalper, a position trader, or a day trader. So, there is no one-size-fits-all for all traders when it comes to rules. However, unless you are a robot or use automated algorithmic trading, chances are that some degree of emotion and mental exhaustion will kick in at some point during your endeavors.

For me, by the time Friday rolls around, it has been a long week of analysis, beginning on Sunday night. When I was younger, I would always trade from bell to bell, or nonstop in futures or currencies in the overnight session. Audio alerts waking me up at 3 AM when London opens, stop-loss orders getting executed overnight, losing relationships because of non-stop trading… I have seen a lot! So, some years ago, and after evaluating my performance each day of the week, I found that Friday was my worst performing day. Since, in the past, I traded heavily in futures markets (which trade around the clock), I found that mental exhaustion does kick in at a certain point (for me it’s by Thursday night) and it takes self-recognition to come to this realization, unless you have a trading partner or are part of a trading group. For you, some or none of this may apply. Perhaps you dig through company financials and charts to the point where it starts to get a little bit fuzzy. The bottom line is that we are all human beings and have a point where the body and mind need to rest. Mental exhaustion can be a killer of good traders. So, for me, I don’t often trade on Fridays. Why would I? The data tells me not to.

Furthermore, there is always the allure of overtrading. The feeling of being in a trade and the seemingly endless world of opportunities at your fingertips can be captivating. It is easy to convince yourself of a good trade opportunity when one really may not exist.

The point of trading is to make money. It is not to feel excitement or a rush. If you want an adrenaline rush, go check out your local horse racing track, skydiving jump-off point, or casino. Successful trading takes discipline, planning, and execution. There just isn’t always an optimal point or reason to enter a trade. As such, a trader should be aware of himself or herself when it comes to this aspect of the business. Sometimes, no trade is a good trade.

Believe me, the market will be there tomorrow.

In future publications, I plan to discuss many more components of market and trader psychology. Stay tuned! This is only part one.

Now, for our premium subscribers, let’s recap the key levels from yesterday’s publication.

Yesterday (May 6), we were evaluating the NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) and were targeting the 50 Day moving average as close to the 50-day moving average as we could get. I outlined the range of $86.91 - $88.17 as ideas for a long entry. We got what we wanted yesterday, with GRID opening at $87.55, pulling back intraday to a low of $87.07 (just above the 50-day moving average ($86.93 on May 6, 2021). The close was excellent for bulls, as the last print on GRID was $87.92, thus forming another bullish-looking candle on the daily charts.

Figure 1 -First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) Daily Candles February 18, 2021 - May 6, 2021. Source stockcharts.com

Intraday price action could not have been much better for a potential entry, as we can see on the 15-minute candles.

Figure 2 -First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) 15 Minute Candles May 3, 2021 close - May 6, 2021. Source stooq.com

We couldn’t ask for a better setup for entry or a better close. Notice the high volume during the final 15 minutes of the session and closing at session highs.

To sum up the current viewpoint and opinion:

I have a BUY call for:

• First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) between $86.91 and $88.17. This could be a long-term holding for those that want to have exposure to the US Infrastructure story as it develops. Short-term traders can look at the 52-week high of $90.96 and high $90.00’s to the psychological $100.00 level as take profit level ideas. Always use a stop loss level that caters to your individual risk tolerance.
• S&P 500 (SPX): but ONLY on a pullback to; or below the 50-day moving average (currently 4014) making the suggested range for entry 3990 - 4014. A close below the 50-day moving average on a given day is a suggested stop loss level. Adjust stop level for your individual risk tolerance.

That will be it for this week, folks. Wishing you and yours a great weekend! Good Trades to You All!

Thank you.

Rafael Zorabedian

Trading Strategist