Is this volatile market giving you an education? Try this trade on an education stock. Check out TAL Education Group (TAL). (February 05, 2018)TAL DJ-30 SP-500 TAL
This is just ugly, DJ-30 ( INDEXDJX: .DJI ), S&P 500 ( INDEXCBOE: .INX ), they all just look ugly. By the way, don’t short the market. The time for shorting this was much higher last week sometime. Don’t look at this and say, “Golly gee, I wonder what I can short?” No. This is a market right now that I really think you need to be standing to the side unless you are already short and then you are just kind of looking to manage your stuff, which is always a good thing.
The market is challenging, very, very challenging and I want you to think about this too (I am going to get to a stock that you might have a trade coming on fairly soon), but I want you to think about this: Unlike a lot of games you don’t HAVE to be trading in any market environment. You don’t have to be trading every single day. I want you to think about it this way: You could say, “Well, I am a professional trader.” Okay, I beg to differ. You are a professional money maker, you are not a professional trader. We are all professional money makers. I don’t care if you are a janitor down at the local school or if you are a CPA or if you work on a factory assembly line, it doesn’t matter. You are a professional money maker, you get paid for your efforts.
Trading is no different, it is JUST a job. It is a job that you get paid for. I want you to think about this; listen to me, I am giving you pearls here. Let’s say you have another job, you are a construction manager on a home building project. If the home builder gives you a call and says, “Hey, you know what? I need you to come to work tomorrow or for the next month but I am not going to pay you anything. I don’t know why I just kind of don’t feel like paying you but I want you to come to work. It is not because I want you to show me how dedicated you are or anything else. You know what? I am just kind of in a bad mood. The kids need toys for Christmas so I am just not going to pay you, period.” Okay, what are you going to do? The real question would be, what are you going to do after you pull a “Johnny Paycheck” on this guy and say, “Take this job and shove it”?
The bottom line is, if you are a professional money maker, not a professional money manager, you are a professional money maker, what you do is make money by working. If your boss tells you he is not going to pay you, well you are not going to show up for work. I wouldn’t. The market is no different. So think about it, if you were trading your rear-end off today and you wound up losing money. Wouldn’t you have been better off just not coming to work because you didn’t get paid? In fact, if you have to make up a bunch of money just to get back to where you were, you are actually not getting paid for that time either because all you are doing is trying to get back to where you were before you lost money.
So you are not getting paid on the way down. You are not getting paid on the way up but by golly you are trading, right? I mean, “I am a professional trader, I trade.” No, you are a professional money maker, you make money. If you can’t make money in the current market environment, whatever that is, then you don’t trade. You don’t morph into becoming a professional trader. Professional traders do not make money. Professional money makers make money. You look at stock as merchandise. You are a wholesaler and a retailer. You buy stock wholesale, you sell it at retail. Boom! That’s it. If you can start looking at the market in those terms you are going to find out that you trade better. And you trade better because you are not trading, you are looking for money making opportunities. And I will say it again, there is a difference.
Let’s look at TAL ( NYSE: TAL ). I am kind of rummaging through my usual deal during the day and I noticed this was actually up a bit, which is like Wow! Imagine that. Something other than inverse ETF up on the day. So I am looking at potential trade here. You can’t really buy it here because if you are buying it then you are assuming that this is the low. You are looking at this channel right here and you are saying, “Gosh, you know what? I think this is the low right here so I am going to buy. I am going to just go all in.” Don’t do that.
You can buy a little bit tomorrow if you want as long as the stock is holding up here. But then keep a super tight stop, I wouldn’t even keep it below 30.00. I would keep it really, really tight because you are kind of trying to get a jump on this in a very volatile environment. In my view frankly, the safest trade would be to NOT trade this right now. Instead set an alert, 34.20, set an alert there and if the stock, IF, not when, if the stock starts trading above 34.20 then you buy that stock. Because I sure wouldn’t call this a cup and handle but I guess you could. But the idea is still the same; the high here was right at this level, we are getting a little tiny pullback so that means there is still some supply here that keeps the stock from doing this, so there is still plenty of supply. So as long as that supply is still THERE then the consequence is the stock is going to stay down here.
If the stock moves up here, the only way it can is if the supply that was keeping it down has now been absorbed, it has soaked up. So now the stock is free to move higher because the supply, again, kept it down here and here and all this time, that supply is gone. So frankly you don’t have to be guessing. You don’t have to GUESS to know whether this is going to hold, “Oh, I think I will do what Dan suggested; I will buy it right here and I will keep a super, super tight stop.” Okay, you can do that. That is an option; keep a tight stop right there, hope you don’t get stopped out. The other option is, don’t do that. Instead, wait. Wait for the sign that the coast is clear. Wait for an indication that the supply here is gone and that the stock is free to move higher. And a breakout above 34.20 will do that for you.