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Beating Volatility: A Trader’s and Investor’s Guide

What is Volatility?

Volatility is the rate at which the price of a stock or other asset increases or decreases over a specific period of time. Essentially, it measures the degree of price variation and uncertainty.

^{Skip to this week’s market analysis & notable news.}

For traders, volatility represents opportunity. Rapid price swings mean a chance to buy low and sell high within a short timeframe. For investors, volatility is often associated with risk, but it can also signify potential long-term gains if managed wisely.

Examples of Volatile vs. Non-Volatile Stocks

1. High Volatility Example: Tesla (TSLA)
   Tesla is known for dramatic price swings based on market sentiment, earnings surprises, or industry news.

   Below is a chart illustrating a high-volatility scenario, where the price has significant ups and downs, creating opportunities for traders to capitalize on short-term movements:

   

   • If you bought low and sold high = opportunity

   • If you shorted $TSLA at the highs = opportunity

2. Prolonged Wave Volatility: Palantir (PLTR)
   Palantir is an example of a stock with wave-like volatility, where prices rise and fall in a cyclical pattern over time. For instance:

   • May 2022: $10 per share.

   • January 2023: Climbs to $16 (a 60% increase).

   • May 2023: Falls back to $8, highlighting the importance of timing your entry and exit.

   • Jan 2025: Stock went on a 1.5 year run to $70+

   

   Larger Swings = less trading days, more holding days. The goal is to purchase at the beginning of a wave and sell as you get near the end of the ride.

3. Low Volatility Example: Home Depot (HD)
   Relatively narrow price range, appealing to long-term investors seeking stability and reliable growth.

   The chart below illustrates a stable trend, where prices fluctuate minimally, offering consistency over time:

   

Volatility for Traders: Patience is Key

For traders, volatility can feel like riding a wave. Sometimes, the wave is short, and you need to wait for another opportunity. Other times, it’s longer, and recognizing when to jump in and out is crucial.

• Short-term volatility: Use charts to identify patterns, such as a stock bouncing between support and resistance levels.

• Long-term trends: Recognize when a volatile stock has sustained upward momentum, but don’t get caught chasing it if the trend breaks.

For example:

• NVIDIA’s (NVDA) rapid rise in 2024 was followed by extreme volatility. consolidation. Traders who entered late to the rally saw diminished returns or losses. Investors may have been saved, as their outlook is long-term.

Volatility for Investors: Time in the Market vs. Timing the Market

For investors, the key is differentiating between temporary noise and long-term opportunity. A volatile stock like Tesla might experience short-term drops but deliver significant growth over years. Conversely, jumping into a volatile stock at its peak can be disastrous without a strategy.

Conclusion: Volatility is a Tool, Not an Enemy

Volatility isn’t inherently good or bad—it depends on your financial goals and risk tolerance:

• Traders: Volatility is your playground. Be patient, study charts, follow news and wait for opportunities to strike.

• Investors: Volatility can signal opportunities to buy quality stocks at a discount, but only if you’re prepared for long-term market fluctuations.

By understanding volatility and how it aligns with your goals, you can navigate the market more effectively and turn uncertainty into opportunity.

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Notable News & Stock Analysis

News

Analysis

In general, the equities market seems to be holding key support levels. $NVDA is still near all-time highs, $TSLA is trending higher, and earnings season is in action with $SNOW $NVDA $AMZN $AMSL all on the clock.

A Trump market will allow for many opportunities and tons of volatility. We’ve seen it already with the TRUMP coin.

Join our discord for key levels, trade ideas, and alerts.

Freebie: I am bullish on $ASML earnings—more info in Discord.

Economic Calendar

This Week's Major U.S. Economic Reports & Fed Speakers

WEDNESDAY, JAN. 29 - FOMC Fed Rate Decision - 2 pm

THURSDAY, JAN. 30 - Jobless Claims - 8:30 am

FRIDAY, JAN. 31 - (PCE) Personal Consumption Expenditures - 8:30 am

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Trading off news could be valuable this week. Look for your favorite earnings play and compare it to when key data is released. You may find an interesting opportunity.