As Donald Trump prepares to become the 45th President of The United States, the final two trading months of the year are now positioned to be more powerful than the ten months prior.
We learned in this book how just a few good weeks can make your whole trading year. The best traders process information through fundamental analysis and technical analysis.
Fundamentally analysis is where you assess real and tangible information. In this case, fundamentally, there is much to consider. The last time we had an all republican government was 1928.
Over the next year, housing, steel and auto sales all began to shrink. That led to the stock market crash of 1929. He was one of the only people to be on the right side of a crash.
It was certainly interesting to note that in the midst of the post-election market rally, technology was weak. Technology today was the steel of 1929 and it did not rally with the market.
This is all fundamental analysis and you can identify trades based on both fundamentals and technicals, but the actual trade should be based on technical analysis. When this renowned trader was trading well, he only used technicals.
Technical analysis is where you only focus on the charts and the movement of the stock. For example, the S&P 500 closed above 2155 on Wednesday which indicates near term positive momentum. The next level of resistance is not until 2175. At that level, nothing else matters.
The president, policy, interest rates are not what’s significant, it’s just that one number, 2175. If we close above we could see a significant surge in stock prices.
If we get up there and fail, we could see a market that retests it’s overnight election lows near 2125. To be able to reduce everything that’s happening to just a couple of must watch numbers makes trading seem easy and it can be.
The challenge is weeding out all of the noise and emotions that go into explaining why we are at those numbers! Rather than using the market as a whole for fundamental vs. technical, let’s focus on one specific sector.
Biotechnology stocks were slumping all year on expectations that Hillary Clinton would become president and slash prices. Today the IBB (Nasdaq’s Biotech ETF) was up 9%, closing at 285. That was a fundamental reaction to the election news. Even with that surge, it’s still 17% off it’s highs. It’s next level of resistance, 285!
It closed at it’s resistance which is what usually happens in times of uncertainty – explained here. That means we will soon know if it will continue to 300 or start to fall back down. Fundamentals draws our attention to the IBB and technicals allows us to have perspective when considering a trade.
So the Trump Trade? Simple.
Don’t buy or sell based on emotions. Instead, simplify the process and use numbers to help you strategize.
To help you build your strategy, use this book.
Until next time,
Adam Mesh is CEO and Founder of The Adam Mesh Trading Group. For the past 18 years he has coached thousands of students to all levels of success in trading. He is also creator of the revolutionary Full Contact Trading