When stocks start bouncing after a strong downtrend, how do you know when it’s safe to get back in the water?
The 20-day EMA will show you the way! Here’s how…
Author: Deron Wagner
Deron Wagner is a professional trader, author of several ETF trading books, and the Founder of Morpheus Trading Group. Since 2002, he has been sharing his proven swing trading strategy with thousands of traders around the world. He has appeared on CNBC, ABC, and Yahoo! Finance Vision television networks, and is a frequent guest speaker at various global investing conferences.
Bitcoin moved back above the psychological support level of 30,000 yesterday, then spent the overnight session consolidating in a tight range above that level.
Now that the price of $BTC is showing a volatility contraction near the highs of its range, a breakout above the week-long consolidation may be coming soon.
In the Wagner Daily stock portfolio, we alerted members that we were buying $AFRM yesterday for a short-term swing..
$AFRM punched back through the breakout pivot after moving out above a tight consolidation:
The major indices remain in a downtrend, but the key is tracking the performance of leading stocks, rather than the major indices.
We have returned to seeing slight bulllish divergence in crypto vs. stocks.
Yesterday, the Nasdaq 100 ($QQQ) was down about 5%, but Bitcoin ($BTC) and most of the crypto market held up relatively well.
The crypto market moved lower today, prompted by a sharp sell-off in the stock market.
However, $BTC and the altcoin market showed impressive resiliance by finding support at mid-day and began edging higher.
Although market conditions are not ideal for our style of trading (breakouts in growth stocks), it looks like stocks want to push higher in the short-term.
Earlier today, we sold HALF of our $MANA position in the Morpheus Crypto portfolio for a solid gain of +17% since our May 13 buy entry.
Although stocks are in short-term bounce mode, the Nasdaq 100 remains firmly in a downtrend UNLESS the index convincingly reclaims support of its 20-day EMA on higher volume.
After the initial spike in $MKR, we waited for a substantial pullback and then entered with an ideal, low-risk entry point.
We then scaled out the next day and quickly locked in an average gain of +44% on a ONE-day hold, as Bitcoin started reversing off its low.