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We’re just 2 days into this week and it already feels like forever.

For those who’ve been growing too comfortable, the market is giving a cold shower and a stark reminder – up is not the only direction it can go in.

I’m not calling the top, but as a trader, I have to take note of current volatility and adjust my playbooks and risk appetites accordingly.

Here’s what I think may happen next and how I plan to trade it.

SPY is Shaking

The SPY is trading nearly 20 points off its all-time high recorded just 2 weeks back.

It even slipped below the $430 level yesterday, before making up some of the lost ground.

And while that in and of itself is not fun, here’s the part that really bothers me:

We’re breaking down the uptrend here – one that’s been defended cleanly and rigorously for the past 18 months, and that’s something that concerns me.

Needless to say, we’re still in a strong uptrend when looking at the very big picture, and this week’s hiccup is barely even a pullback:

But what we saw today and yesterday is clearly a change in the market’s character and something to be aware of.

I’m not looking to instill fear in you: this can easily be another “buy the dip” situation – in fact, that’s what I’m hoping and playing for, I’m a Raging Bull after all.

But I have to adjust my strategy based on what the market’s showing me and be ready if stuff does hit the fan.

That’s why I actively watching…

Bounce Trades

There’s one key difference between buying the dip and buying the bounce.

On a pure dip – your expectation is a market rebound and for things to “get back to normal.”

With a bounce, however, the idea is that an already oversold name will get a natural influx of buyers and short coverers, who will bring up the price. And then, if the general market is strong – that only makes things better.

There’re 2 main reasons why I think right now is the best time to shop for bounce trades:

  • Extra Protection: When buying a dip in high-flyers (and virtually everything is a high-flyer these days) – if you’re wrong, there’s no telling how far down something can go. But with bounce trades, the stocks are already down a lot and have clean levels to trade against.
  • Extra Reward: A good bounce trade can produce a great move by itself. But if the market rebounds strongly with it, I think we may truly see some fireworks.

As you can see, this setup allows me to maintain an overall bullish bias, while skewing the odds slightly in my favor.

There are a few stocks I’m currently watching for potential bounce plays:

Vinco Ventures – BBIG

  • Market Cap: 540M
  • Free Floating Shares: 55.5M
  • Short Interest: 26%
  • ATR: 1.42

I don’t think this name requires much of an introduction – it has been a traders’ favorite over the past few weeks.

The company owns a Tiktok competitor (albeit, obviously, a much-much smaller one) and rightfully gets its fair share of hype.

The stock has been nothing but beaten down over the past 2 weeks and is currently trading near the major $6 level.

If it holds above $6, I like it a lot for a bounce into the $10 area and possibly a new let higher to far above that.

Flora Growth – FLGC

  • Market Cap: 204M
  • Free Floating Shares: 33.31M
  • Short Interest: 2.26%
  • ATR: 1.60

I think many of you would remember the stock – in the good old summer days, it’s made some solid nouse.

Much like its peer from above, it’s seen better days, it’s hovering near support and, coincidentally – that support happens to be at those same $6.

The stock is trying to rebound following yesterday’s scare – I’ll be really excited if it can climb back above $6.

I’m looking to trade it against yesterday’s low of $5.20 for a possible bounce into $8-$10 area.

Baidu – BIDU

  • Market Cap: 52.9B
  • Free Floating Shares: 268M
  • Short Interest: 3.61%
  • ATR: 5.73

Here’s one I believe you didn’t expect to make the list – the Google of China itself.

BIDU has been beaten down quite a lot lately and for some valid reasons – the current Evergrande scandal and uncertainty over the Chinese market and economy are just the latest in a series of negative events affecting the company.

Still, Baidu is Baidu and if the chart is right, I see no reason to avoid the name – we can certainly get a good run-up if the current downtrend breaks.

I want to see it hold current levels and get above $170.

That’s where I’ll be interested in a potential move into the $220 area.

Author:
Jason Bond

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