I tried to warn you months ago, when the Fed started taking away the punch bowl, that preparations needed to be made for markets that were going to be more volatile than we’ve been accustomed to from the March 2020 lows to the highs of late 2021.

Now, if anyone tries to tell you that they were able to pick the exact bottom in either SPY or QQQ this week, I’d be very skeptical. 

As the CEO of RagingBull, I take pride in the fact that our gurus simply do not hide from their mistakes. 

In fact, we embrace them by highlighting what went wrong during some of our trades so that you can experience for yourself the benefit of sticking to a plan when things get tough.

Folks, it stinks to lose on a trade! 

You know it and I know it. 

But trust me when I tell you that it stinks even more when you neglect to obey stops and watch those losses snowball to the point where they wipe you out.

With that in mind, I am about to teach you an incredibly valuable lesson that you won’t get from any of our competitors. 

Coming into this past week, the markets were on an unrelenting slide as Russia – Ukraine tensions intensified through the Presidents’ Day weekend.

That fueled one of the most pessimistic trading environments I’ve seen in quite some time.

Extremes, whether they be momentum or sentiment-related, are the bread-and-butter for traders like me, who wait patiently for prices to either fall to major support levels or rise to critical resistance levels before entering a position.

Let me tell you, more often than not the kinds of extremes that we saw at the start of this week usually result in the markets squeezing into the kinds of reversals that make for great contrarian trades.

Teachable Moment: A contrarian is someone who bets against the crowd. 

The key in this business is repetition, or the ability to keep entering the trades that you feel fit your style of trading.

Along with that, however, is THE MOST IMPORTANT RULE OF ENGAGEMENT, which is to apply protective measures that allow you to keep losses small.

With that in mind, this week my Bullseye Pick of the week was to BTO (buy to open) the 7 Mar 22 QQQ $345 Calls at $6.50.

As is always the case with these trade ideas, this idea came with protective guidance to stop out of the trade if QQQ fell below $336. 

Folks, there is plenty of research to suggest that markets usually turn higher in the days following the outbreak of war.

Don’t believe me?

Take a look at this history lesson conducted by RagingBull’s very own Davis Martin this past Wednesday. 

You see, the threat of war always presents a level of uncertainty that the equity market simply finds hard to handle.

Once the horror of war actually starts, however, markets tend to reset to their bull trend.

The common problem, however, is being able to time precisely when the market will find its lows once war has begun. 

This makes it all the more important to keep trying to trade ahead of that turn but to also apply strict stop-out rules to limit losses and keep you in the game until you can position yourself correctly for the final bottom.

That was the case with my Bullseye Pick this week, which I got stopped out of below the $336 stop on Wednesday.

Now, if you are saying to yourself, “yah, but you missed the entire rebound that occurred after Thursday’s open,” well, there are two things to consider: 

1. THERE IS NO WAY ANYONE SAW THAT REBOUND COMING TO THE DEGREE THAT IT DID.

2. The chart below shows that this particular option, the 7 Mar 22 QQQ $345 strike call, traded to as low as $0.36 at its worst point during the sell-off on Thursday morning. 

Even the best traders who did not stop out early like I did the day before would often panic at the sight of such a huge loss as this option was registering at Thursday’s opening low of $0.36 (remember, I got in at $6.50) and sold for a much larger loss.

To YOUR Success!