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What To Do When the Tape is Bleeding Red

Before computers and the internet, traders had to rely on ticker tape.

Stock ticker machines printed stock, price and volume information on paper strips after being transmitted over telegraph lines.

Any time you see the string of “ticker” symbols move across the screen of your favorite financial news channel…

You’re seeing a relic of the old days that has stuck around.

What’s also stuck around is the term “tape,” which traders use to refer to the price action in the market.

And right now, the tape is bleeding red.

As of Monday’s open, almost every stock was down.

Nothing was safe.

Mega-cap stocks like Apple (AAPL), Alphabet (GOOGL) and Tesla (TSLA) pulled back along with small- and mid-cap names.

The image below is from one of my watchlists that tracks the MarketSmith Growth 250.

MarketSmith Growth 250 Watchlist -- Source: MarketSmith
MarketSmith Growth 250 Watchlist — Source: MarketSmith

It’s not a pretty picture.

I’ve been warning about the lack of market participation and how a stealth correction has been going on below the surface for months now.

Buy the Dip? Not Yet

As of yesterday, just 30% of stocks were trading above their 200-day moving averages.

Even Cathie Wood’s ARK Innovation ETF (ARKK), beloved by many traders and investors, is down by over 40%.

Weekly Chart of ARK Innovation ETF (ARKK) -- Source: TC2000
Weekly Chart of ARK Innovation ETF (ARKK) — Source: TC2000

And these are stocks bought “on sale” after pullbacks by who many believe to be one of the best fund managers alive.

Needless to say, the Santa Claus rally did not make an appearance in 2021.

So, what can traders and investors do in a market environment like this one?

Well, my advice is to cut your exposure way down.

Personally, I am not putting more than 25% of my account in stocks until I see conditions improve.

I’m still taking some trades, but with smaller-than-usual position sizes and only those where I can risk very little.

No matter how good your system or strategy may be, the market will not always cooperate.

There are simply times when there is no money to be made, and this may be one of them.

So, sit tight… Preserve your capital…

And be prepared to strike when things turn around.

Embrace the surge,

Ross Givens

Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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