Dominating a Down Market With Technical Analysis

Dominating a Down Market With Technical Analysis

by

technical analysis

When the markets start to get bearish, most traders get fearful.

Pictured: Most traders

But AJ “The Oracle” Monte is not most traders. A licensed Chartered Market Technician (CMT) with decades of options trading experience, AJ knows there’s plenty of money to be made in a bear market. 

By analyzing past market trends, AJ maps out future price action, allowing each candlestick to tell a story. And his record speaks for itself. 

AJ’s January VIX Prediction

In December of 2021, the market was relatively sanguine. Many fund managers were loading the boat, preparing for a continued calm in the market. AJ wasn’t so sure. 

On 12/29, with the VIX trading at just $16.95, AJ laid out a bold prediction: things were about to get volatile, in a big way. AJ said that by January 24th, he expected the VIX to surpass $25.71, mapping out a 52% run in less than 30 days.

Technical Analysis VIX1

You’ll be hard pressed to find an analyst who’ll give price targets on the VIX — and finding one who will put a date on those targets? Good luck. 

But that’s exactly what AJ did. And on January 24th, his analysis came to fruition.

technical analysis VIX2

The VIX had not only surpassed AJ’s target, it soared 130%, peaking on the exact day AJ predicted. 

AJ doesn’t have a sixth sense. There’s no crystal ball, there’s no ESP. This is chart reading, plain and simple. Let’s look at another example. 

Calling the Top In a Bull Market

On January 19th of 2022, AJ reviewed the monthly candles of the $QQQ Tech ETF, and makes another striking call: the bull market is over. 

We are on the horizon of some 1,000 point down days.

technical analysis QQQ 1

AJ wasn’t calling for a freefall to zero, but with QQQ trading at $366.48, he was preparing for a serious period of downward price action — by arming himself with put options. 

If you’ve traded at all in 2022, you know what happened next.

technical analysis QQQ2

$QQQ went on to fall 20% after AJ’s analysis, dropping from $366.48 to $293.97.

technical analysis DOWThere’s your 1,000 point down day. Source: Google, CNBC.

It isn’t that AJ is some overzealous bear. He’s just reading what the charts tell him. 

And as for traders who followed along with calls on the VIX or puts on $QQQ…? We’ll let trading legend Jon Najarian tell you how it went.

Folks, I must tell you that, on the bearish side, I’ve never made more money than when I’ve been following AJ, and his $IWM, or his $QQQ trades. […] And if you listened to him, and you established a trade — even a small one — it offset a ton of bad throughout the rest of the portfolio.

Now, let’s take an inside look at how AJ breaks down the charts, using one of his most recent calls in Apple ($AAPL).

AJ Monte’s $AAPL Analysis

The long term trend for Apple was broken this week. So now, the resistance has been lowered. If it goes up to test that resistance up there around $160 to $165, it’s going to be hit hard I believe, by those who are trying to get out with minimal damage. Remember, that’s called overheard resistance: when the long term buy-and-hold investors are losing money, and looking for the escape hatch, they will now look for the next rally to get out and save their position.

By drawing a simple trendline, AJ was able to make two key predictions about Apple’s next move: 

  • That it might move back up to $160-$165.
  • That if it does, it’ll bump into strong overhead resistance.

Remember: this is not a trade recommendation. It’s just a look inside how a talented CMT reads the charts. 

The Bottom Line

There are a two important takeaways from this lesson:

One: Traders who understand options should not fear a down market. There’s just as much opportunity trading bearish price action as there is trading bullish price action, as Jon Najarian described in the video above. 

Two: Technical analysis is a powerful tool. By learning to read the charts, traders can use trends of the past to make predictions about the future. It might sound complex at first, but that’s why it’s so important to seek guidance from skilled analysts like AJ Monte.

If you’re curious about how you can get more of AJ’s analysis, check out his weekly service, “AJ’s Options Pro“— where all three of the above predictions were made. 

Subscribe to Rebel Roundup for your weekly digest of market highlights and free trading lessons.
We’re on a mission to empower retail traders with the tools they need to succeed.

Join a growing community of traders with Market Rebellion

Join the thousands of users daily!
Start Your Day the Smart Money Way

Real-time Analysis

Interactive Chat Q&A
Professional Tactics