Stocks: Extended Market, What Does This Mean?
Kay Kim | Jan 12, 2018 04:02PM ET
It's never easy shorting a rising bull market, especially when it is in a extreme overbought sentiment as we are in currently. Because it can stay overbought longer than anyone can anticipate or expect.
We have to understand that extreme overbought condition is actually a good thing for the market in the long run, however, it means odds are catching up against the buyers in the interemediate term (several months).
Soon or later the market will pullback and I can not tell you when it will pullback, but I can tell you that, it will pullback when no one expects it to pullback. Because this is the phase where so many people are chaing this move to the upside, because they were not able to profit last year. Because they lost money shorting last year. Because they were scared last year. So, now, they don't want ot miss out---and this is how the danger come about when it comes to trading; chasing is always deadly for any market paricipants.
Furthermore, this is how the market operates, as the traders and investors starts to think and believe and lie to themselves that 'we are now enterting into a new era of trading,' that's when the market will punish them hard.
If you are a long-term investor and holding many stocks, this is a GOOD news for you and I believe market is going to have another good year. Best bet is, you could put some hedges on to protect your long-term stocks from the decline that is about to come.
But if you are a trader, especially a Options trader, I would be very cautious up here trying to chase this thing to the upside; but know this, I wouldn't trying to short this thing either.
It's always tough business trying to time the pullback perfectly to profit.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.