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With Leaders Breaking Down, Focus On Playing Great Defense

Writer: TLivingstonBlogTLivingstonBlog

Over the past two weeks, I have been stopped out of many quality setups. In addition, I've been seeing many leadership stocks such as TSLA, NIO, PTON, CRWD, TDOC, and NVCR breakdown and lose their 50-day moving averages. This is not the type of action I like to see, especially after such a sustained uptrend like we've just experienced. This may be a sign of short-term trouble ahead.







Sentiment has been at an extreme for months and I was on the lookout for a correction in early January and then again in late January. When market action started to shapen up, I was quick to reverse and take the best setups I saw such as TLRY. My philosophy is to be flexible and to follow the market's lead. When conditions appear to be strong, I'm bullish. When I see leaders break down, I get defensive. The key is to do more of what works and less of what is not working.


While I still hold three positions, I have my stop loss on all of them at breakeven. When the market flashes warning signs like it appears to be doing, you want to think defense first. I'm still very bullish long-term, but have no desire to trade through a difficult environment. If we get bullish reversals and quality setups, there will be plenty of buying opportunities again and I will be quick to jump in. However, the key is to make sure you have enough "bullets" left to fire when those opportunities arise. I used to make a habit in my early years of running up my account only to give back all my gains during a correction. The financial and psychological price I paid is not something I would ever want to experience again. I learned the hard way that when the leaders start to break down, forget about trying to throw Hail Mary touchdown passes. Instead, focusing on playing great defense is what wins the game of trading.


Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained in this post constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned in this blog or the associated Twitter and Instagram feeds. The stock or stocks presented are not to be considered a recommendation to buy any stock or stocks. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.

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Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

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