Happy Wednesday, traders.

Jeff here.

In case you didn’t notice … yesterday was an extremely critical day for the markets. 

After more than a month of melting up, the major indexes faced a monumental rejection yesterday.

The Invesco QQQ Trust (NASDAQ: QQQ) was down more than 1.5% as crypto stocks and mega-cap-tech companies sold off.

The downside move was arguably led by Apple Inc. (NASDAQ: AAPL) which continues to tank. The stock is down 5.6% in three days. 

This is exactly why I’ve been warning you about this mania-driven market bubble.

SPOILER ALERT: It looks like the bears are finally starting to come out of hibernation.

As the market trend shifts, your mindset needs to change as well…

If you get married to a pattern or a position — unwilling to change your setups when the market calls for it — you’re dooming yourself to failure.

I’m telling you this today because the market could be gearing up for a major trend reversal to the downside. 

On the one hand, if you aren’t ready for it, you’ll get smoked. 

On the other hand, if you’re prepared when opportunity strikes — you could potentially make a fortune.

Today, I’ll show you how volume, volatility, and key price levels can help you time trend reversals perfectly…

Listen to What the Market is Telling You

When a big trend reversal takes place, there are always some traders who get caught flat-footed.

They don’t see the reversal train barreling towards them and fail to get off the tracks before it’s too late.

But there’s an easy way to avoid this … listen to what the market is telling you.

The stock market has a personality. If you pay attention (and know what to look for), it’ll send you clear signals about where the price action might be headed.

Here’s what I’m watching for:

• Volume: So far, the selling volume hasn’t been as large as the buying volume. I’m looking for a big-volume red day on the major indexes for the confirmation of a trend reversal.

• The SPY $500 level: If the SPY breaches below $500, that level will start to act as resistance, making it more difficult for the chart to exceed it again. 

• The VIX: To fully confirm a bearish trend reversal, I’m looking for the volatility index (VIX) to trade closer to $20. Real traders thrive on volatility. 

On the same token, don’t fight trends…

If the major indexes stack a few more red days together, it’ll be hard to ignore that the trend is flipping to the downside. 

At that point, if you’re still buying calls, you’ll be ignoring the trend and setting yourself up for disaster.

Trading is a game of flexibility. Always be prepared to switch things up when the market conditions are shifting.

Adapt Your Trading to Fit the Moment

You’ve gotta constantly adapt your patterns, setups, and game plan if you wanna survive in the options market. 

An unwillingness to admit your setup has stopped working will probably lead to major losses.

A sector can be hot one day, only to go ice cold and gap down the following day. 

Look at crypto stocks for perfect examples of this. A few days ago, traders were buying stocks like Marathon Digital Holdings Inc (NASDAQ: MARA) and MicroStrategy Inc. (NASDAQ: MSTR) hand over fist. They couldn’t buy enough.

Then, yesterday, it felt like traders were practically giving the shares away…

Both stocks posted double-digit losses, down more than 10% each intraday. 

That said, a lot of traders got destroyed yesterday by chasing the highs in crypto. In my opinion, the better play would’ve been attempting to short the top. The puts were cheap. 

This is why I’ve been warning you about blindly buying calls into this rally. 

If you’re gonna have a long and successful career in the stock market, you can’t be rigid. 

You must be willing to adapt to any market conditions. Toss out tired setups as soon as they stop working.

Listen to what the market is telling you and adapt your strategy to fit the moment. 

Do so and you’ll be a better trader for it.

Happy trading,

Jeff Zananiri

P.S. In times of market uncertainty, there’s one move that works better than any other…

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