Hey guys, just as promised here’s a post of some ugly trading I did in FAZ today. Once again, if there is no volatility in the VIX I’m like a one-legged Spartan with no sword.
3 bad entries:
Black arrows– those are my bad entries for longs. They were false breakouts that led to a flag. Did it to me twice!
Red arrow– bad entry to short FAZ. Wow, that was lame because it made me go from short FAZ to long FAZ at the wrong time! Two steps back kind of thing.
Looking back, I should have just held FAZ the entire day. However, there wasn’t enough volume in the tape for me to pick a side. Notice the momentum on FAZ… that was tricky because it was deep red early in the day, and as it melted up there was very little momentum- that’s what gave me a false signal to short FAZ.
Finally, seeing how out of sync I was, I went constanza on myself (lol) and bought the first failed test of FAZ at 51.60 (since normally you would short FAZ there. Ha!). And, true to the anti-tape FAZ took off. What a lame stock. Anyway, I wouldn’t suggest trading that way, nor would I suggest trading this tape. I think I was fortunate for buying FAZ at the failure of 51.60 but rarely does that ever happen… so yeah, I made stupid money there.
Looking back one more time, I should have simply played the flag breakouts on FAZ (which is equal to the flag breakdowns on the DOW). But whatever, tomorrow we fight, and this time I’m bringing a sword.
Oh, one more thing. Someone asked me about what the “imbalance” in the tape is that me and UpsideTrader keep mentioning on StockTwits… well, I’m not sure what Upsider’s view is but it’s probably close to mine… for me, it’s a momentum term that is influenced by day-trading capital and swing traders who are on the side-line. That capital has to go either on the long or the short, while those aready in the market have the choice to sell or add. So, think of the tape as a see-saw on a pivot. When momentum shifts to one side then all that capital piles up and causes momentum to build more until we get “imbalance”. You want to be on the imbalance side (heavy side) until it gets “too high.” What happens when it gets too high? People start jumping off and the see-saw shifts right back. Many times day-traders will play this imbalance one of two ways:
1) ride the See-Saw down (the heavy side), which is like going with the momentum in the direction of the tape.
2) or riding the See-Saw up (counter-trend) as stock moves back to equilibrium. This one requires you to be real patient to enter, and real quick to exit.
This happens quite a lot intraday and its more conspicuous if you use 1-hour charts.
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I was starting to think you were infallible too 🙂 Thanks for sharing Gio.
ha. that would be nice. If I get no read on the VIX my trading performance drastically falls. Let’s just forget about today, k. 😉
… oh yeah, as a practice, usually after an ugly trading day I cut all holdings and trade quantities in half, whether swing or day trade. A rough trading day is the expense that I pay to find out that its time to cut back in trading. I kind of view myself as a stock. Odd no?
Funny I had a better time than usual reading VIX, saw it cross resistance then fail the next. But then gave back profit into the mean reversion blender, oh well. I am not sure about the momentum indicator, isn’t it only price minus price x periods back? That would make it zig bcuz there was a zag x periods back, I don’t trust eet, mane
Today’s tape should have been read in this order… Technical, Momentum, Sentiment (VIX).
So yeah, momentum wasn’t truly great either, no thanks to all the whipsaw in the broad market.
The simplest thing to do today was to short on all the bearish flags since every time the tape broke the bottom of the flag, it lead to selling imbalance.
I just received my tax info from my broker….and am wondering if option trading is a must report. In the 1099 section of the tax packet it shows my transactions for stocks only, not options. In another section I received all the option transactions fall under “non-reportable activity”. Does this mean I don’t need to bother with reporting options?
Thanks
yeah, you gotta report them, it still is income. run Gainskeeper to find out your net realized gains/loss for option trades or download the file from your broker to a spreadsheet. Its a pain to do, so get familiar with the “sort” function.
report on Schedule D as you would stocks, short term and long term. My guess is its all short term for you.
That’s why the stops on these 3x guys need to be really loose. Who knows if it will be forming a bull flag, or just a precursor to a big drop off? I only play these FAS, FAZ, TNA, TZA with very small positions because of the crazy movements. This market is a pure gamble these days anyway.
These 3x ETFs should be banned! why don’t they just get it over with and make a 10x.
Personally, posts like this reviewing the moves made, the shots to the enemy, and the legs lost is more helpful longer term to help me develop as a trader. Appreciate the humility even for a great trader like yourself. I’m bringing The Ax (not M. Whitney) tomorrow.
I thought the imbalances he was referring to was the sell-buy order imbalances near MOC. Ie. if you look @ HCN on Jan 29 … there was a huge sell imbalance just prior to the close (and prior to their guidance downgrade). Anyways just my 2 cents.
@Ferrari … that works too i guess. my reference to “imbalance” is a little closer to Bo Yoder’s price-pattern trading style.
Cool Gio – also link to a bullish HK idea – not sure if I buy it but entertaining the risks to the short play.
http://www.daytradeteam.com/dtt/day-trading-strategy/2009/01/hey-hey-hk-petrohawk-energy-corp-nyse.html
Also I was trading FAZ all day too – that was a pretty solid cup and handle formation that I wrote about on stocktwist FWIW
Interesting play on HK. I see the same techz on HK but I was looking more for a bearish play, in other words, Nick (hey I didn’t know Nick posted w/ DayTradeTeam) is looking for the ascending triangle breakout, I’m looking for the breakdown. either way is a possible play.
I’ve also secretly been hoping to see HK drop. Great post!