Happy Tuesday, traders…
Jeff here.
Unless you’ve been living under a rock, you’ve noticed the market has been getting smashed all month.
But then, last Thursday, unexpectedly strong earnings from Alphabet Inc. (NASDAQ: GOOG) and Microsoft Corp. (NASDAQ: MSFT) saved the day.
This is clear evidence that big tech earnings can move the entire tape.
Like I’ve been saying for the past few weeks, I think there will be a battle of market sentiment during the April earnings season.
We keep flipping back and forth between two cross-currents of fear:
- Geopolitical fears, which have subsided a little bit recently…
- Inflation fears, which have not subsided…
Now, we have a MASSIVE week ahead of us as earnings season comes to a head.
After today’s closing bell, we’ll get numbers from Amazon.com, Inc. (NASDAQ: AMZN) and Advanced Micro Devices Inc. (NASDAQ: AMD) — two of the most consequential stocks in the market.
Plus more…
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And as a cherry on top, we’ve got the Federal Reserve’s policy meeting tomorrow.
All this to say, I expect some enormous moves over the next few days, and I have some very specific advice to help keep you safe during this earnings volatility.
With that in mind, let’s get to my Tuesday Market Outlook…
Why You Must ‘Shrink the Game’ This Week
First and foremost, you need to be more disciplined and conservative when trading a week like this one.
When you come into this kind of market — one with huge external news flows happening on a 24-hour cycle — it’s time to shrink the game.
It’s easy to get emotionally overwhelmed in a market like this. When the news cycle is moving this quickly, it can be difficult to follow everything diligently.
But missing one key piece of news in this tape could make you less efficient, less accurate, and more prone to human error.
Trying to come up with a long-term prediction based on the fundamental picture is extremely difficult to do right now.
That’s why you want to shrink the game, protecting yourself from one bad decision that leads to a brutal loss.
Some traders will try to be heroes in this tape and get even more aggressive as volatility is ramping.
But make no mistake — most of those traders will get destroyed.
As TLC famously sang, “Don’t go chasing waterfalls.”
3 Easy Steps to ‘Shrink the Game’
You may be wondering how exactly you can ‘shrink the game…’
Here are three ways to do it:
Tip #1: Don’t Overtrade
My first piece of advice is to avoid overtrading in this tape.
Some traders feel the need to make a trade every single day.
But this is a fallacy. The stock market is constantly changing…
If you’re sticking to a consistent strategy, you should be selective and discerning.
Overtrading can lead to some of the worst trades in your career, as it can be mentally taxing and cloud your judgment.
When there are no slam-dunk setups available: exercise patience, like a zen master.
However, when the right setups arise: act quickly and decisively, like a samurai warrior.
And my next tip will help you avoid the temptation to overtrade…
Tip #2: Narrow Your Watchlist
If you’re finding yourself tantalized to trade subpar setups, do the following:
Focus on a small handful of stocks you trade the best — the ones that consistently make the most money — and you’ll have more than enough opportunity to profit in those names.
By giving yourself limited options (excuse the pun), you can focus on the best setups only.
That way, when one of those stocks makes the move you’re looking for, you’re more likely to see it in time and capitalize on the play.
If you’ve got 30+ tickers on your watchlist, are you really gonna notice the best move right when it happens? Probably not…
But if you keep your list small and selective, you’re far more likely to identify actionable plays immediately.
And your watchlist isn’t the only thing you should keep small during this unpredictable week…
Tip #3: Smaller Positions
Last, but not least … you should size down your positions this week.
Smaller positions can give you more wiggle room to make mistakes (especially if you’re trading a small account).
The most important thing is that you go on to trade another day. Never risk more than you’re willing to lose.
You can always add to a winner (which is much better than cutting a loser).
I can’t tell you how many traders I’ve seen blow their entire careers on a few poorly-sized trades.
And with implied volatility (IV) elevated and price swings exaggerated during earnings season, this is even more important to consider right now.
Shrink the game, keep it simple, and narrow your focus.
Happy trading,
Jeff Zananiri
P.S. I’m seeing another EXPLOSIVE catalyst that I haven’t even gotten to yet…
TODAY, April 30 at 12 p.m. EST … I’m going LIVE to break down this URGENT market catalyst from one of the market’s biggest tech names, and why it’s set to launch a domino effect of explosive moves over the next week.
Don’t miss my EXCLUSIVE LIVE SUMMIT — Click here now BEFORE IT’S TOO LATE.
