EarningsBeats Digest

Published: Fri, 03/04/22

EarningsBeats.com Digest for March 4, 2022

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You MUST Respect Price Resistance During a Bear Market

One mistake that many investors make is assuming that a downtrend is over once we see some relief in the form of a short-term uptrend. That is REALLY dangerous. Occasionally, the bear market will be over and prices will continue to rise. But most of the time, the rally is nothing more than a headfake. Respect key price resistance....until it's cleared. Let me give you a perfect example of a stock that simply ran out of bullish gas when it hit price resistance - Cloudflare (NET):

We've now seen multiple failures at that 120 level. Listen, I love NET's business model, and when the dust finally settles, I believe NET could be a great long candidate during the next phase of this secular bull market that we've enjoyed since 2013. But, for now, we MUST respect bear market rules, #1 of which is DO NOT MARRY YOUR LONG POSITIONS. Be nimble and take your profits if you're fortunate enough to have some on the long side. At some point, NET will successfully negotiate 120 price resistance. When it does, it may very well be time to be in it on the long side. Right now, however, I'd take the much more cautious approach and sell at price resistance.

Happy Trading!

Tom Bowley
Chief Market Strategist

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