Rally, hesitate, delay, shakeout, RALLY. Repeat.

A quick scan of the front page, looks like iBC owned today’s tape. I did my damage over on StockTwits… retracements, Vix breakdowns, rallies right on cue!

Here’s a day-trader’s analysis of how to trade relief rallies. Study this, and file it for another relief-rally day:

• Rally
• Hesitate- bulls not sure if we go higher
• Delay- bulls test day highs but delay the breakout
• Shakeout – weak bulls get shaken out.  We hold.
• Rally!

I had VIX < 44.58 as rally point since that was the pattern thus far.  It was a little conservative, but I got it.  There was one pretty big shakeout (see chart), but when that bottomed, the rally began.  Note though, that the VIX works much differently in “Relief Rally Tapes”.  A relief-rally tape is tantamount to bear-panic-buying, hence, even if the VIX moved up a little, as long as it kept its downtrend, then the likelihood of another market spike would be there.  In other words, whenever you have these relief-rallies, fixate in your mind that the market is going up until the close.

On my trades I went long SRS on the “delay” period, knowing very well we would re-test and break that double top.  Then shorted SRS during the shakeout period.  Its cool though, I didn’t get shook out, although that shakeout (see chart) was a bit bigger than I thought.

Market breaks the double top, and we head to highs, SRS to lows.  Ta da!  😉

Laterz,

gio

If you enjoy the content at iBankCoin, please follow us on Twitter