If you followed me on this trade, tell me you didn’t feel like this yesterday…assuming you didn’t let the noise get to you, and get out of a great trade:
This is precisely why I chose this stock on this week. You knew it would be actively discussed, and I felt that this week was that inflection point in sentiment. I was right. My analysis was confirmed when I saw this:
I’ve watched this stock trade now for many months without taking a trade. In some circles, it’s become a market indicator at times. That right there automatically perks my interest. I was validated when I saw the push back in the comments.
My mind is conditioned to find patterns. At the beginning of the week, $DB triggered the most bearish pattern I’ve ever seen. Or at least, it triggered what the crowd has told me, was the most bearish price action they’ve ever seen.
We started the week with a big gap down under a known level of support and sold off into the close. Very bearish. Tuesday, we saw prices open slightly lower and rally a bit at the open. After pushing higher for the first half hour, prices sold off. That’s the move I bought.
In the context of an important gap down, any failed strength the following day is as bearish as is gets in the minds of most traders. Reminded me of Grey Monday, August 24th 2015. Same sequence. The failed rally on the 25th triggered the most bearish poll result I have ever seen. That was something I won’t ever forget, and still reference it often.
Yesterday, $DB was painted across the news, twitter, blogs, chat rooms…everywhere. They expressed their point. They were bearish! And as a result, they got interested, DOWN HERE, as seen below.
At yesterday’s close, the put/call ratio in $DB was 4.3. In other words, everyone ran to one side of the boat.
Not declaring victory yet, but as you’ve seen me work…I try hard to find these inflection points in sentiment. Why “roll the dice” on $DB? Only because it was at the forefront of sentiment this week.
My calls absorbed yesterday’s decline well and was never down in this position. Despite the push back from some readers, I felt there was something very intelligent about this trade that wasn’t respected.
Hence my write up.Comments »