Stocks are rising. Bears are hiding.
And bulls could be running out of time.
Time before the next sell-off, that is. With the market pushing ever higher, the rally will eventually cool off. Every post-crash rally has done so in the past.
For the current rally, that moment has yet to come.
But investors don’t seem to hear the “ticking clock.” Instead, they’re buying even more fiercely than before.
That’s got analysts the world over feeling a little nervous as reopening efforts continue in the United States. A plethora of good news – something we haven’t seen in ages – is pumping up stocks. New housing data came in far better than expected and economic activity is rebounding.
COVID-19 cases, while rising slightly, aren’t indicative of a “second wave” like many health officials feared. The limited reopening seems to be working, but bulls refuse to face the last harsh truths that will limit the economy, and by proxy, the market:
There is no COVID-19 vaccine yet, and even with one, an economic recovery would likely take years.
38 million Americans lost their jobs since the coronavirus outbreak began. Many of those payrolls won’t be coming back when the pandemic has ended.
A Facebook survey revealed that over 50% of small businesses won’t be rehiring their laid-off workers. 30% will close permanently.
And sure, large corporations will remain open. Many of them, like the FAANG companies (plus Microsoft), have continued to prosper in the face of considerable coronavirus-related hardships.
But most, sadly, have been wounded severely.
Don’t get me wrong; eventually, the U.S. will get back on its feet.
It might just take a little bit longer than bulls would like. The danger here is that the market is setting far too quick a timeline for the recovery moving forward. If the economic data doesn’t support the already priced-in comeback, massive selling could follow.
That’s why some traders are now looking for opportunities in both directions – up and down – on stocks that look like they could go either way.
Snap Inc. (NASDAQ: SNAP), a stock we featured last week, has been “ping-ponging” between resistance (green) and support (red) for several trading sessions now.
SNAP finds itself trapped, ready to burst either upward or downward depending on what happens with the general market. If stocks keep rising, SNAP, a social media company, should see its shares fall.
If SNAP trades below today’s low, it might make sense to take it short below support at $16.00.
Alternatively, if the market finally corrects back down, SNAP shares should rise. If the stock trades above resistance, it might make sense to go long on SNAP with a trade trigger of $18.50.
Either way, SNAP gives traders an opportunity to profit, regardless of where the market goes.
Or, whether its next move makes any sense.
