The last seven months have been difficult for traders. It's been a choppy market that hasn’t really gone anywhere. While the S&P 500 has been on a relentless uptrend, IWM, IWO, FFTY, and ARKG haven’t really gone anywhere. There has been turbulence beneath the surface.
While this can be frustrating to live through, each strategy has its’ time and season and sometimes it is just best to step away until conditions improve. The thought of a summer shakeout was in the back of my mind in July, and it seems like we got that in August with IWO, IWM, and many stocks seemingly putting in an important bottom. COIN, SHOP, NVDA, and TSLA had important shakeouts in August. These types of move flush out weak holders, leaving only those with conviction onboard. NVDA has already broken out on strong volume while COIN, SHOP, and TSLA all are forming really great bases, especially Tesla.
We are also seeing some excellent action in some other growth stocks. ZIM broke out on massive volume on Tuesday and ABNB looks like it is about to resume a strong uptrend as the world reopens. Palantir is also setting up really well after a long basing period.
It is also important to note that the FED had its’ Jackson Hole meeting this week, and the market appears to like that Chairman Powell said the FED should not rush to fight inflation.
So what does this all mean? Well for me, it’s rather simple. I’m going to keep monitoring the action of the stocks on my watchlist and in my portfolio. Are they breaking out? Are they falling on heavy volume? Am I getting stopped out of my trades? Is my account value going up or down? As stocks set up and breakout, I will continue to buy them with a stop loss in place to limit my risk. The key is to not ignore the market, even if trading has been difficult like it has been since February. While living through a summer shakeout can be difficult, it is often true that darkest hour is right before the dawn.
Full Disclosure: I currently own many of the stocks featured in this post.
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