The back story: Being a trader is a bit like being a field goal kicker in football; you’re only as good as your next kick. You may have won the last game, but if you miss your next chance to put points on the board, it would be easy to feel like a bum.
As traders, it’s easy to think that every day is that next kick, and that you have to attack each day and take a shot all the time. Unlike a field-goal kicker, you get to decide the next time you take the field.
Why I’m cautious today: In my opinion this market is overly extended and needs a big correction.
I don’t know what the catalyst is going to be, but it’s earnings season and surprises can trigger downturns and reversals. The way this could start is with Facebook (FB), Alphabet (GOOG), Apple (AAPL), and Amazon.com (AMZN) all missing earnings in near future. While unlikely – and I have no special insight into the books on those stocks — it’s the stock market and anything it possible.
That said, Alphabet reports tonight, and I’m expecting to be playing that move tomorrow.
What I am looking for: Another chance to win the game. Last week was a good one for me and my subscribers, and I’m not anxious to give any of that back. Given the market’s upward pressure but the need for a correction that I see coming (I’m not alone in that), I’m looking for charts I can trade with confidence. I’d be more confident after a mega-cap tech stocks earnings miss, but I will wait and watch right now rather than rushing the field.
Davis Martin is the head trader at Dailyprofitmachine.com. He trades SPY calls and puts and swing trades individual stocks and stock options. At the time this article was published on RagingBull.com, he had no positions or open orders in the stocks mentioned here, though he was watching Alphabet closely and looking for a possible trade tied to its earnings announcement.