Last week saw some of the biggest drops that the stock markets have seen from years.
The reason being:
- Overvalued prices
- Corona Virus
The markets were just looking for a reason to sell off and the Corona virus was a good enough excuse.
There was a major supply zone, as well.
Those two factors together with a fundamental reason (Corona) aligned all the stars for the short sellers.
Some of my students managed to take advantage of this sell-off. It is great to see how patience pays back.
Now the question is what to do?
Indices Selloff Update
It looks like the indices will take a quick breathe of fresh air before continuing the downfall.
Can they reverse from this point?
Will they reverse?
I am not so certain.
I believe that there is more space for short-sellers to gain more profits.
In fact, as I wrote in my article from the 2nd of February, I was expecting a major sell-off based on a major supply level.
I think that for DAX, the next important level is at around 10,500.
This is another 1400 points lower.
For Dow Jones (US30), the next important level is 22,000. This is 3,500 points below the current price.
The question is how fast will price drop to this level and whether it will go that far.
Can it go even further?
In trading there are no certainties. Traders need to know how to read the price at the current moment, not try to predict the future.
The future is as unknown as it could be. Professional traders should be in the zone of the present.
No trading indicator can predict the future of the markets.
No trading guru can do that for you.
Instead, you can concentrate on the present and make the most of it.
There are numerous examples of traders who are doing it.
But still, those numerous examples are just a small fraction of the sea of blood that other traders have left after them.
Conclusion- Indices Selloff
Am I seeing a major indices selloff?
I believe it might have already started.
Now it depends on how price action will play out and also what the fundamentals will tell us.
I am not just considering the Corona virus at this stage.
Another fundamental event such as bad earnings or another financial disappointment might give more fuel to short sellers.
What is important now is to be able to stay calm, be patient, follow your plan and do not rush selling.
Usually great opportunities come when a very few traders are expecting them.
Great opportunities do not come after one another. In other words, if you have missed this opportunity, wait for the stars to align again before taking action.
Wait for the price to retrace to an important level before taking action.
Do not rush mindlessly, because that is what draws the line between a successful and a losing trader- his/her ability to wait!