GAME PLAN REVEALED: 05/01/2025

In this morning's GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, delivered a comprehensive analysis of the market's powerful rally following major tech earnings, identified critical technical levels on multiple assets, and shared valuable insights on trading psychology. Today's article explores these key themes while providing deeper context on technical confluence, earnings-driven market dynamics, and psychological discipline in volatile conditions.

The Market's Whipsaw: From GDP Shock to Tech Relief

The market's dramatic reversal over the past 24 hours has been nothing short of remarkable. After Wednesday's economic data delivered a shocking negative GDP reading and concerning job numbers, Thursday brought powerful earnings from tech giants Microsoft and Meta that completely shifted market sentiment. As Gareth described:

"We have a rally on Wall Street today. This is on the back of Microsoft and Meta earnings. Both coming out better than expected. Their guidance was solid, really calming nerves on Wall Street, at least for now."

This whipsaw price action illustrates a fundamental truth about modern markets: economic data can drive initial reactions, but corporate earnings—particularly from market-leading tech companies—often determine lasting sentiment. The GDP contraction reported Wednesday represented the first negative reading since the pandemic era, suggesting potential underlying weakness in the economy. Yet less than 24 hours later, strong earnings from two tech giants with a combined market capitalization exceeding $5 trillion effectively soothed investor concerns.

The market's powerful intraday reversal Wednesday also raised questions about information leakage. As Gareth noted:

"I have to wonder based on especially the late day move up if some of those earnings reports were leaked out to big players and they ultimately started buying up the market ahead of the release to the public... Things can slip through door cracks and oftentimes they do."

This observation highlights an uncomfortable reality for retail traders: major market participants sometimes have informational advantages. Historical market data supports this concern. Research has documented statistically significant price movements before supposedly "surprise" announcements across multiple market cycles. While impossible to prove in any specific instance, these patterns suggest the playing field isn't always level.

For traders, this reinforces the value of technical analysis, which focuses on actual price action rather than attempting to predict news. The reversal pattern that formed yesterday—a morning selloff followed by afternoon strength—created a powerful technical setup regardless of what catalyzed it. Understanding such patterns can help traders position appropriately even without inside information.

Technical Confluence: The Power of Multiple Factors

One of the most valuable concepts Gareth demonstrated today was the identification of high-probability trading levels through technical confluence—where multiple independent technical factors converge at a similar price. This approach was particularly evident in his analysis of Microsoft:

"First thing I came up with was a downsloping trend line here... Then in addition there's a gap fill... The last thing I do, and this is something I do at the very end once I found my levels, I use my fib tool... And look at the alignment here. This is a perfect 786 fib retrace."

This methodical, multi-factor approach to technical analysis represents a significant evolution beyond simplistic chart reading. By identifying where multiple independent technical factors converge, traders can identify zones with substantially higher probability of serving as support or resistance.

In Microsoft's case, three significant technical factors aligned in the $438-443 range:

1. A downsloping trend line connecting previous highs
2. A major gap fill level
3. The 78.6% Fibonacci retracement of the recent decline

This confluence creates what technical analysts call a "high-density" resistance zone. The probability of price respecting such zones is significantly higher than areas identified by a single technical factor. Research on market psychology suggests these zones work partly because different types of traders focus on different technical approaches—some watch trendlines, others gaps, others Fibonacci levels—creating a concentration of selling interest when multiple factors align.

Historical market data supports the effectiveness of confluence-based trading. Studies examining support/resistance effectiveness have consistently found that areas where multiple technical factors converge show higher statistical significance as reversal points than single-factor levels. This explains why professional traders typically seek multiple confirmations rather than relying on any single indicator or pattern.

For traders seeking to apply this approach, Gareth's methodology offers a clear framework:

1. Identify primary technical factors (trendlines, major support/resistance)
2. Look for overlap with significant chart patterns or gaps
3. Confirm with Fibonacci retracements or extensions
4. Assign higher probability to zones where multiple factors converge

The power of this methodology lies not just in identifying potential reversal zones but in distinguishing between high and low-probability setups—a critical distinction for effective position sizing and risk management.

Earnings Season Dynamics: Technicals Amid Fundamental Catalysts

This morning's analysis of stocks that reported earnings offered valuable insights into how technical analysis can be applied during periods of high fundamental volatility. Gareth distinguished between appropriate approaches for day trading versus swing trading in such environments:

"Swing trades have to be major levels meaning like longer-term trend lines, retrace to scene of the crimes from parallels that go back years... Those are what we want to think about for swing trades... versus day trades can be more just pivot points."

This distinction becomes particularly important during earnings season when stocks often make explosive moves that can trap traders using inappropriate time frames. The contrast between Microsoft and Meta (both reporting strong results) versus Qualcomm (dropping on earnings) illustrates how different technical approaches are needed for different scenarios.

For Microsoft and Meta, which gapped significantly higher, Gareth identified major technical resistance zones that could serve as shorting opportunities despite positive earnings. This counterintuitive approach—looking for short entries after positive news—exemplifies sophisticated trading psychology. Rather than being swept up in bullish sentiment after strong reports, experienced traders recognize that positive reactions are often exhausted at key technical levels.

Meta's analysis was particularly instructive, with Gareth identifying the $603-610 range as a confluence zone where multiple factors aligned:

"So look, we have this parallel channel... We should see good resistance at a retrace to the scene of the crime... And the 50% retrace is right at 609 or so as well."

This approach to trading earnings reactions differs markedly from common retail strategies, which often chase momentum after positive surprises without considering technical context. Historical market data shows that stocks frequently reverse after reaching key technical levels, regardless of how positive the earnings report may have been. These "technical exhaustion" points often mark where institutional profit-taking overwhelms retail momentum.

The analysis of Qualcomm, which dropped on earnings, demonstrated a different framework. Rather than looking for immediate bounce opportunities at arbitrary percentage declines, Gareth identified specific technical levels that might provide support:

"When you look at where this could be a bounceable opportunity, the first thing I kind of gravitate to is this big move here up and then this was your pullback before this recent move. So essentially I start looking right around 132 to 131 right in here for that support level."

This approach—using previous price structure rather than arbitrary percentage pullbacks—represents a significant advantage over simplistic "buy the dip" strategies. By identifying where previous buyers stepped in, traders can anticipate where new support might emerge with higher probability.

Trading Psychology: Discipline Amid Volatility

Perhaps the most valuable insights from today's GAME PLAN came in Gareth's reflections on psychological discipline and position sizing. After 26 years of trading experience, his approach to entry and risk management reflects hard-earned wisdom:

"While technical analysis is fantastic, markets can break levels, right? So you could have the greatest level in the world; it doesn't mean the market won't break it or that stock or that crypto won't break it. And so I always found I make more money by airing on the side of caution and inching in versus jumping in the water."

This incremental approach to position building represents a profound psychological insight. Rather than placing full-sized positions at technical levels—effectively making binary bets on support/resistance holding—seasoned traders often scale into positions. This approach acknowledges both the probabilistic nature of markets and the psychological reality that no trader can predict with certainty where reversals will occur.

Gareth's swimming pool analogy captures this perfectly:

"When you come up to a lake or a pool, we don't, without even touching the water, we don't just jump right in. We usually dip our toe or our foot in the water to see the temperature first. Is it freezing? Is it warm? What's the temperature? And then we decide after that to go in."

This graduated approach to position sizing offers several psychological advantages:

1. It reduces the emotional impact of being wrong on initial entry
2. It allows traders to improve their average entry price if the market moves further than anticipated
3. It prevents the "analysis paralysis" that often comes from waiting for the perfect entry
4. It acknowledges the inherent uncertainty in all market predictions

Research in behavioral finance supports this incremental approach. Studies have found that traders who use scaled entries and exits typically achieve better risk-adjusted returns than those making binary all-in/all-out decisions. The psychological benefits translate directly into performance advantages.

Similarly, Gareth's approach to taking profits demonstrates psychological sophistication:

"While most people want to swing for that home run every time and just max out their potential gains, I've learned the hard way that that doesn't really work so well... What I do is, you know, when I'm in a short as it comes down, I take a little off. As it comes down lower, I take a little off."

This incremental profit-taking strategy prevents the common scenario where traders watch significant unrealized gains evaporate as they hold out for theoretical maximum profits. By "legging out" of positions, traders can secure partial profits while maintaining exposure for potential further movement.

The psychological framework underlying these approaches represents a mature understanding of market uncertainty. Rather than seeking perfect entries and exits—which exist only in hindsight—experienced traders create systems that work with the probabilistic nature of markets and human psychology.

The Flexibility Imperative: Adapting to Changing Conditions

Today's GAME PLAN concluded with perhaps the most important psychological lesson for traders: maintaining flexibility as market conditions evolve. As Gareth emphasized:

"The biggest thing, a lesson to learn from today's game plan, is being flexible. Be flexible that patterns can change, patterns can fail, resistance and support can fail, or it can work out. It's the traders that are able to spot it as soon as they can or as soon as it happens that will perform the best overall."

This willingness to adapt to changing market conditions represents a crucial psychological skill that separates successful career traders from those who flame out after brief success. Markets constantly evolve, with patterns that work in one regime often failing in others. The natural human tendency toward cognitive commitment—sticking with initial assessments despite contrary evidence—creates a powerful psychological trap.

Gareth specifically highlighted this challenge in his analysis of natural gas:

"The only thing you want to be aware of here folks is that if we go sideways, what type of pattern is that going to create? Right now it's still resistance and still favors a pullback. But let's say it starts to do a Bitcoin where it goes sideways... Then you all of a sudden have to flip your bias from being bearish to being bullish."

This cognitive flexibility—the ability to reverse market opinions when evidence changes—represents perhaps the most difficult psychological skill for traders to master. Research in cognitive psychology has consistently shown that humans have a powerful tendency toward confirmation bias, seeking information that supports existing beliefs while discounting contradictory evidence.

For traders, this bias creates expensive mistakes when market conditions change. Those who maintain rigid bullish or bearish biases despite evolving technical conditions typically underperform those who remain adaptable. This explains why Gareth emphasized:

"If you're a technician, you're not worried about sticking to your guns. It doesn't matter. If the charts tell you the probabilities are shifting, you better change your probabilities with the charts."

This willingness to follow evidence rather than ego represents the psychological foundation of sustainable trading success. It requires both humility to acknowledge when initial assessments prove incorrect and intellectual agility to rapidly develop new market hypotheses.

Conclusion: Technical Discipline Amid Macro Uncertainty

As markets digest the contradictory signals of negative GDP data and strong tech earnings, the technical framework outlined in today's GAME PLAN provides valuable guidance for navigating uncertain conditions. The current environment presents both opportunities and challenges:

1. The S&P 500 approaches its gap fill level around 5675, a critical resistance zone Gareth has identified for potential short entries
2. The Nasdaq, having surpassed its gap fill, now faces resistance around the 493 level on the QQQ
3. Microsoft and Meta have staged powerful rallies that approach significant technical resistance zones
4. Gold and oil continue their bearish patterns, with technically-driven targets suggesting further downside
5. Bitcoin and Ethereum show constructive technical patterns that may signal further upside

Beyond specific levels, today's analysis reinforced core trading principles that remain relevant regardless of market conditions:

• Technical confluence creates higher-probability trading opportunities than single-factor approaches
• Different technical frameworks are appropriate for day trading versus swing trading
• Incremental position building and profit-taking typically outperform all-in/all-out approaches
• Psychological flexibility remains essential as patterns evolve

As tomorrow brings the critical non-farm payrolls report—which may either confirm or contradict the concerning GDP and jobless claims data—these technical principles will help traders navigate whatever volatility emerges. By focusing on multi-factor technical levels, appropriate position sizing, and psychological discipline, traders can maintain probabilistic edges even amid macro uncertainty.