Ten days ago, I discussed some of the enemies that are present in trader psychology, namely mental exhaustion and overtrading. Today, we will take a moment to reflect on those points, while discussing some other aspects that we all contend with during our endeavors.

In my opinion, there is no need to be constantly active in any market. To do so would mean that there are always favorable buy and sell levels. Sure, some traders are more active than others. But for the majority of discretionary traders, constant buying and selling is not possible, unless they’re scalping. Even with a scalping strategy, it is virtually impossible to compete with high-frequency trading that can only be achieved using algorithms and robots.

Again, all traders are different or have different strategy types. Some days, there may just not be any readily apparent opportunity in your given market. Do not force it! It is more or less how I feel today. We have commodities all the way up, US equity indices coming off a volatile mid-week last week that ended with a bounce to the middle of a range. At the same time, the $VIX was crushed (volume crush), and in my experience, this leads to rangebound action. That can be great if you are trading certain options strategies. Every strategy gets a turn.

As mentioned in the first part of this series, the market will be there tomorrow. Sometimes, the sidelines and just holding and/or waiting for a market to come to your desired entry or exit levels is the right move.

What about when we are not feeling well?

When we aren’t feeling well, our bodies, and therefore our minds are just not 100%. In this often-misunderstood world of trading, a high level of sharpness is required to perform at high levels. As a rule of thumb, trading is not a good idea when we don’t feel well. Even when a trader is tired, or just feels like they might be getting a cold, it may be best to avoid making important decisions. Again, the market will be there tomorrow.

When you tell someone you are an active trader, you may often be misunderstood. Many folks just do not understand the sharpness and precision that is required; to even attempt to succeed. Depending on a trader’s individual level of activity, it may take everything he has 24/7 to trade effectively. That’s a long week! Let’s be sure to tackle such a week or anything similar only when our bodies and minds are performing at the highest levels possible.

Let’s review the markets we are actively watching:

Figure 1 - Invesco MSCI Sustainable Future ETF (ERTH) Daily Candles November 13, 2020 - May 17, 2021. Source stockcharts.com

As so much attention was given to what was going on in the $SPX last week, I have not yet mentioned that ERTH did trade into the top edge of the idea levels that were mentioned back on May 10th. Here, we were looking at a range of a 61.8% retracement level and the 200-day moving average. ERTH did indeed touch its 200-day moving average last Thursday (May 13); and traded to a low of $68.65 intraday, briefly breaking the 200-day moving average of $68.82. Yesterday, ERTH closed at $70.44.

Figure 2 - First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund Daily Candles December 23, 2020 - May 17, 2021. Source stockcharts.com

GRID closed at $87.95 yesterday (May 17). It traded through our buy idea zone $86.91 and $88.17. At current levels, it is still within the zone as of the time of this writing. The 50-day moving average is currently $87.29 as of Monday’s market close.

Figure 3 - BLOK Amplify Transformational Data Sharing ETF Daily Candles November 13, 2020 - May 17, 2021. Source stockcharts.com

After mentioning to monitor for pullbacks to the 200-day moving average and key Fibonacci retracement yesterday before the bell, BLOK did indeed pullback, losing 3.10% on the day. However, further sliding is needed to reach the levels of confluence. The 200-day moving average currently sits at $37.22. BLOK finished Monday’s session at $44.32.

To sum up the current viewpoint and opinion:

I have BUY opinions for:

• Amplify Transformational Data Sharing ETF (BLOK) between $36.50 - $37.91. BLOK has a history of high volatility, so proceed with caution. Always use a stop loss level that caters to your individual risk tolerance.
• Invesco MSCI Sustainable Future ETF (ERTH) between $67.76 - $68.74. Always use a stop loss level that caters to your individual risk tolerance.

Given the bounce-back late last week, I am in wait and see mode for $SPX.

• S&P 500 ($SPX): but ONLY on a pullback to; or below the 50-day moving average (currently 4070.33), making the suggested idea range for entry 3990 - 4070.33. This range is a wide one, and we are in wait-and-see mode. For traders using SPY, the current 50-day moving average is 405.78, so a range of approximately 398 - 405.78 would line up rather well. Always use a stop loss level that caters to your individual risk tolerance.

I have SELL opinions for:

NONE

I have a HOLD opinion for:

• First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID). GRID has traded through our idea range of between $86.91 and $88.17. It is not suggested to chase it over $88.17, if not already long, in my opinion.
• 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.

Have a great day! And remember to pace yourself.

Thank you,

Rafael Zorabedian
Stock Trading Strategist