One of the main events of this week was an incredible rally Gamestop Corp (NYSE: GME). Shares that recently traded below $ 10, suddenly jumped to the extended $ 483 dollars. All spoke about the ability of private traders with their small accounts to influence the fate of oversold shares, provoking "short compression". Many market participants call for a comprehensive investigation, stating that the system is broken, and this cannot be allowed.
Rally Gamestop shocked Wall Street
Thanks to the possibilities of social networks and smartphones, people from all over the world can instantly share ideas, content and impressions regarding assets or trading opportunities. Unlike the 1980s, when people had to call on the phone to chat with the nearest circle of friends, social networks allow one person to publish reports that instantly become available thousand and even millions of people. News feeds willingly pick up trends by expanding the audience. We live at an interesting time; The flow of information is now faster and freer than ever before. And the Gamestop graph below shows what this could lead to.
The output is simple: if you are lucky, and your portfolio has already included "Hype" assets, then everything is fine. Sandlute the wave and try to squeeze out of the rally to the maximum. If you only enter the market, be extremely careful; Very easy to give in to a hitch on the deck of such a trend. The risks are very high, and sudden bursts are usually short-lived. Remember that experienced traders always fix profits when they can.
"Zeroing" Trend Spy
As a result, major institutional players suddenly realized that they need to revise the horizons of tolerance in relation to risks, especially by short transactions. A very large number of firms began to analyze how the gap in 2 or even 3 standard deviations will affect their capital and plans (or, more likely their absence) in this case.
Such rethinking usually opens a number of new trading opportunities. Whole sectors are corrected or changed in such a way as to "reset" trends. Regardless of how the markets behave after this discharge, traders will always find a way to earn this by choosing the most attractive asset at the moment.
On the hourly charter, the Spy can see the fall, almost three times higher than standard volatility, and reactive recovery less than 24 hours after the collapse. This is what we call "zeroing". Depending on which direction will head the market after rollback, new moderately long-term trends will be determined in the next 7-15 days.
20-period MA has become the foundation of the recovery of Spy
One of the key factors that should be taken into account when analyzing the schedule below is a rebound of the price from a 20-period moving average. Despite the fact that Spy has repeatedly made it, a similar picture in the past provoked a rather active rally attempts. If the upward trend continues, we can expect the emergence of "bullish" triggers in the near future for the entire sector or individual representatives.
Similar "reboots" create excellent commercial capabilities. In the coming weeks, traders must be followed by the market in search of confirmation of signals on the most promising assets.
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