The main U.S. stock market indexes were mixed between -0.3% and +1.1% vs. their Thursday's closing prices on Friday, following lower opening of the trading session and an intraday bounce off support levels.
One way to prevent losses in a deteriorating position is the use of stop-loss orders. A stop-loss order is activated when a stock, ETF or futures contract reaches a certain price point. Let’s use the example of Facebook. On the afternoon of Jan. 4, 2018, a purchase of FB is made at $185. After rising above $188 a stop is placed to sell FB at $184 (just below the previous high close) on Jan. 11. This means that at $184 the stop becomes a market sell order and the long position is liquidated.
Markets had a 12% correction and that appears to be it. For now. The Dow is in the process of violating a perfect setup where it could’ve jumped off the ledge. Here’s a lesson I learned about 14 years ago. Unlike many who got their training in the old Internet bubble go-go days, I cut my teeth in the bear that followed.
But will the sentiment remained that bullish after cash market opening at 9:30 a.m.? For now, it looks like the market may extend its short-term uptrend and continue its run above 2,700 mark. It may retrace the whole Wednesday-Friday's sell-off.
The markets plunged Monday, with the Dow falling nearly 1,600 points in the largest intraday point decline ever. This "February 2018 market crash" caused us to look back at some of the more recent historical market moves.