PPT Oversold wins again, and a look at the Russell

Hey all,

If some of you are getting bored of me writing about the Russell 2000, well, sorry – that’s my favorite trading instrument (well, index, TNA is the favorite INSTRUMENT 🙂 ). This is how I’ve made most of my money since I started trading, so there.. 🙂

The PPT oversold trade executed 2 days ago was a work of Swiss precision and beauty – buying on a dip after the day OverSold was flagged was, typically, the sweet spot (not always, but most of the time).

I sold out most of my TNA this morning, just before the jobs numbers, and then I sold the rest plus all my ERX on the pop after the numbers came out – gaining me about 6-7% in 2 days. This is about half of I used to aim for, with O/S plays, last summer, but I’m so unsure about this market here, I’m taking gains where I can get them.

I thought to myself: would I be more regretful if (a) I sold and it went higher, or (b) held, and I lost my gains? The answer is (b). There’s never anything wrong with taking profit, and I needed that profit to undo some stupidity from last week. So even though my trade was up almost 7%, overall, the whole TNA/ERX position, including some left over stuff from before, only gained me about 1.5% portfolio gain. Will be more patient next time, wait for oversold, and buy more, not having an underwater position already, which I was, in essence, averaging down.

Now, looking at what’s happening today:  the Russell futures came close to the overhead resistance which has been building over this month:

840 was my rough target, we hit almost that, so that was also a reason why I sold out this morning.

Following the high open, we dropped quite a bit, to the point where we seem to be, more or less, in the middle of the channel (I’m not an experienced chartist/technician, just drawing lines where I see them).  While the multi-day trend seems to be clearly down, in the short term (hours, 1-2 days), I feel this is a crap shoot, where we’ll go next, so I’m not too eager to go either short or long. Going short Russell this morning, with a stop somewhere above that resistance line would have been a high prob trade. Buying Russell when we get closer to the bottom of the range will be a high probability trade.

Doing anything with the Russell here is, well, a coin flip, and with The PPT hybrid RAPIDLY climbing, and approaching OverBought levels, well, I’ll stay away.  Same logic applies: will I be more regretful if I (a) don’t buy and it goes higher, or (b) I do buy, and it drops? (b) – so I won’t do it.

Last thought – for people thinking “why not just buy and put a stop loss”? TNA is so volatile that any normal/reasonable short term stop loss is very likely to get hit, just from its normal movements, and a big stop loss, when, that’s when my (a) vs (b) comes in. At this point, I want to avoid a bigger loss more than I want to try and squeeze more money out of it.

I see the futures are popping up, just now, both SPY and Russell – who knows, maybe we’ll be making new highs here. But I’ll wait for a definite confirmation of a reversal from the month-long down trend, before committing more money here. Doing 1-2 PPT/oversold trades per month is boring, but can be very lucrative. Can I find my patience again? Let’s hope so… 🙂

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