Trade of the week: long S&P 500

(Partial video transcript)

This week's trading opportunity

Axel Rudolph: Hello and welcome to "Trade of the week" on Monday the 10th March 2025. And let's get straight into it. I would like to go long the S&P 500. Yes, I know everybody's been selling it for the last few weeks, and we even had a short Nasdaq 100 trade we wanted to put on a few weeks ago, which would have worked out really fine, had we gotten into it.

But anyway, let's look at this week's "Trade of the week". Why long the S&P 500? Well, basically, as you can see here, on Friday we dipped down to our key support area. Can you see here? All these highs going back to July of last year and the highs from August and September of last year. And also the October, the early October and late October lows here, and early November lows, they all come in at around, the 5,670/5,680 area or so. And this is exactly where we found some support on Friday.

Now, we formed this hammer formation, and, obviously, the hammer formation is a bullish reversal signal, but only if it gets triggered, only if we rise above the high seen on Friday. So, we haven't done that yet because we're doing "Trade of the week" on Monday. But since we held at that key support area and because, if you look at the Fear and Greed Index, this is the CNN Fear and Greed Index, and you can see that on their website, it’s freely available. We've been in Extreme Fear territory for the last two weeks, and that quite often acts as a contrary indicator, at least in the short term. And because, if you also look at the Cboe put-call ratio, which is also at two year highs, all of that seems to suggest to me that, short term at least, we could see a bounce back.

Now, obviously, we could be wrong, but we're only risking 2% of capital per trade. So what's this week's "Trade of the week"? For these technical reasons, for the sentiment reasons, what I would like to do is to go long the S&P 500 at 5,710, so at current levels, with a stop-loss not just below Friday's low, ideally I'd like to do that, but in case today we have a bit of volatility, we go slightly below it intraday. Maybe put our stop just below 5,600 here. Leave ourselves a little bit of breathing room, with an upside target around the 5,800 or 5,900 area. So a short term bounce back in this now downtrend that we've seen over the last three weeks.

How to navigate trading losses

Now, with regards to "Trade of the week", as you know, in January we had four trades go wrong, which was awful. We got stopped out several times by a small margin. But that was it. And we stuck to our guns because, even though we were down over 6% on these four trades, and even though in February we had four trades where we were dead right, we only managed to get into one of those. We actually made all our January losses back with that one trade, because if you look at EUR/USD, you can see here we went long EUR/USD on that Monday 10th February.

And we have now hit our upside target. We're coming close to my first upside target here, which is the November high. And above that, the $1.10 area. Now, because I'm going on holiday, and because I can't watch these trades whilst I am away, I'm going to cash this trade in. But personally I think it's going to go much further.

I think EUR/USD can go to $1.10 and much further than that actually, over the coming weeks and months. But let's just say we get out of current levels from our long trade here at $1.0326, at $1.0855. And we also had last week's trade, which was long the AUD/USD. And we did that long one here.

We bought it just here. And we were right on that one as well. And we can cash this one in also, at $0.6328 here. So, if we were to cash all our trades, the long trades EUR/USD and AUD/USD, in we would now be up by over a percentage point since the beginning of the year, wiping out all those previous losses because we stuck to our rules, we stuck to our guns, we managed our risk and we knew that with our strategy, in time, we would get some winners.

So this week's "Trade of the week", just to reiterate, is to go long the S&P 500, with a stop-loss just below 5,600 and an upside target between 5,800 and 5,900.