Navigating Choppy Markets In January

February 4th, 2014
in contributors

by Jeff Pierce, Zentrader

January saw volatility come back into the markets that we haven't seen the likes of since October as seen in the VIX chart below. We're definitely not nearing any extreme levels, but it is enough to have traders on edge, judging by my twitter stream. If we don't find support soon then this little pullback is likely to turn into something more severe. One contrarian play that I've been considering is that so many traders have turned bearish or are thinking that the markets are going to rally a little bit higher and then roll over. Many seem to think a topping head & shoulder pattern will play out but it's never that obvious. In fact, in my experience if a technical pattern is that obvious it almost never plays out that way and if it fails it can be an explosive move in the opposite direction.

Follow up:

My best guess as to what happens, and this is only a guess. We rally hard to the upside, taking out previous highs and well beyond, sucking every last bear in and then we fall. And it's not a big collapse that every0ne thinks of when they think of a correction. It'll be the death of a thousand cuts where it goes 3 steps down and 2 steps up, always giving the bulls hope that the market is going to rebound, but turning lower just before it looks like it's going to rally, thus trapping traders in their positions.


I personally was an aggressive buyer of stocks for the few months leading up to January and then during the last week of December I started lightening up my positions and nearly had a cash position into the first week of January. When it appeared that the markets wanted to go higher I started dipping my toes back in and was also buying select positions throughout January, especially the week before this past one. It was a difficult month trading compared to the last 6 months, but as you can see by our closed position we still did OK inside tradewithZEN navigating the choppy markets. You can also click here to see the actual entries/exits.

December closed trades stats

7 winners with the avg gain being 4.86%

0 losers with the avg loss being 0%

From June to January 31st the stats break down:

56 winners with the avg gain being 6.02%

12 losers with the avg loss being 3.51%

As of today we have 88 of the 100 slots filled for tradewithZEN. I am capping membership at that number because I don't want any more than that following the same stocks that I trade with this strategy. Let me repeat. Once we reach 100 members it will be closed until someone unsubscribes so if you want in you best join now before it's too late.

If you'd like to learn how to trade momentum stocks safely while receiving real time market timing signal for Dow, Nasdaq, & TSX then go here to learn more how my trading edge can be yours.

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