As the market digests today’s Fed decision to hike interest rates another 75 basis points (as expected), timing your trades perfectly is of the utmost importance.
It’s no mystery that certain times of the day are more exciting to trade than others.
And on a day like today, where a major catalyst is occurring right near the market close, you’ve gotta be careful when you enter (or exit) your positions.
I love trading the market open and close — the two most volatile periods of the trading day. But I approach the two very differently.
Before I tell you how I trade them, you may be wondering why I’m bringing this up today…
Let me explain. The prior five Fed meetings have followed a very consistent pattern of price action…
When the interest rate decisions have been released, around 2 p.m. Eastern, the market has quickly dumped. Then, around 2:30 p.m., when Jerome Powell has started speaking, the market has rallied.
This has been an observable trend over the past four months, but today it flipped. When the decision came out, the S&P 500 ETF Trust (NYSEARCA: SPY) surged from $383 to $388.
(NOTE: As I’m writing this, the decision was just released but Powell hasn’t begun his speech yet…)
With that in mind, let’s talk about why I trade power hours and how you can maximize your timing around today’s huge economic news.
In the first 30 minutes of trading, I lean towards bearish put plays. Let me explain…
As the opening bell approaches each morning, traders are excited.
The entire market has been anxiously waiting all night — everyone’s ready to go.
While you may think this exuberance could lead to bullish setups, I often find the opposite to be true.
On overextended stocks (or these days, markets), the first 30 minutes of trading can bring massive opening flushes.
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This is why the market open can be an amazing time to trade first red day setups or stocks that are backing off resistance.
That said, based on the market reaction to the Fed meeting thus far, anything could happen tomorrow.
So how can Evolvers prepare for potential opening dumps?
- Have your watchlist organized the night before…
- Focus on your most bearish setups near the opening bell…
- Watch closely for failed morning spikes into clear resistance…
If a stock (or the overall market) loses a key support level, the opening flush can be an ideal time to nail bearish patterns.
The end of the trading day is often crazy as well — but in a different way.
Seasoned Evolvers know I have a negative bias. I prefer to buy puts and rarely go long on anything.
But when I do go long, it’s into the closing bell. But why?
After the morning exuberance settles, the energy around the close feels different…
As the closing bell draws near, traders rush to get all their orders in. They’re all positioning themselves for the following day.
This gives big % gainers time to prove themselves before I pull the trigger on the long.
This is why I often execute my long trades in the last 30 minutes of the trading day.
If you’re tracking a bullish setup, follow my lead. Try to put the trade on toward the end of the day.
That said, this isn’t a perfect science. There will sometimes be good put-trading opportunities near the close or call-trading opportunities near the open. Don’t ignore these setups simply because it’s the wrong time of day.
But do your best to maximize your bearish trades in the morning, while nailing your bullish trades in the afternoon.
Anything could happen today. I recommend waiting until after Powell’s speech, seeing a clear market reaction, and then reassessing your trade opportunities.
But whatever you do, don’t fight the market.
If you’re gonna trade, do it when the biggest moves are happening — near the open and the close.
I find focusing on morning bearishness and afternoon bullishness can make the decision easier.