After the technology-sector selloff earlier this month, the sentiment on Wall Street has changed dramatically. Where before there was a sanguine and sometimes arrogant attitude, meaning that some investors seemed to consider the market to be unstoppable, today there is a degree of nervousness that we have not seen for a while.
The change in sentiment opens the door for a choppy market during the summer months. Such environments during the low-volume summer months aren’t unusual, but now that there has been this material change to sentiment, the likelihood is even greater.
Here’s how you can take advantage of that, by using a proactive strategy.
These strategies are designed to profit from choppy market environments, and I have been designing proactive strategies since January 2000. One is called the “Lock and Walk,” and it has been profitable in the past during choppy markets. Of course, past performance is no guarantee of future results.
The strategy is designed to respect support and resistance levels in the Nasdaq 100 NDX, -0.80% and then to trade the ProShares UltraShort QQQ QID, +1.61% and the ProShares Ultra QQQ QLD, -1.53% when support and resistance levels are tested or broken.
With these rules, you can do it yourself:
If support is tested by QLD, target resistance to sell.
If support breaks, sell QLD.
If resistance is tested by QID, target support to sell.
If resistance breaks, sell QID.
There’s nothing fancy about these rules. Indeed, they are very familiar to anyone who uses technical analysis — buy near support, sell near resistance, but if support breaks, stop out.
However, there is another important rule associated with the Lock and Walk strategy. If this strategy has 67 basis points in gains, it is designed to shut down and wait until the next trading session to begin operations again. We’re not looking for long-term positions here, and that is what enables it ((to do well?)) in a choppy market environment.