Market continues to defy gravity and drift higher. Today was a bit more than I had expected, but necessary if there is an imminent short to be had. Bulls need to be drawn in to chase a move higher. Over the past few years, the best setups on either side have come from the binary disguise; bullish setups that turn bearish for the flush, and bearish setups that turn bullish for the ramp. You buy red and sell green. Lows are bought, tops are sold. Rinse, repeat.
Shorts come in many shapes and sizes. I like to vary the types of short setups I play, because the ‘bearish’ setups to which classical technicians/chartists subscribe do not always work in all market conditions (nothing does). There is no silver bullet setup that will work all the time. This is what makes trading so challenging. Your reference point is an impermanent proxy for the engagement of market ideologues. You can look for the quick parabolic short (worked textbook with gold/miners recently), the pops/shoulders within a toppy distribution pattern, the bear flag move back up into supply, the broken trendline, failed support, etc… Over the past couple of years, some of the best short setups have come from failed bullish consolidations (binary disguise).
I’ve organized some of the potentially actionable short setups below along with their corresponding annotated charts. My plan is to scale into a basket of shorts in the near term as a play on the May bearish thesis I’ve been sharing. In my position/swing account I’m currently net long, but am starting to put some shorts on: $PE (currently underwater, avg. 24.20s), $O (64), and small size $VXX to go along with some longer dated long holdings.
Admittedly, I’ve been preempting bearishness and have little price-action based pretext to initiate broad-based, index-wide shorts. Without the price-action trigger, all of the thesis-building regarding seasonality, fundamentals, psychology, headlines, and narrative will stunt adaptability and drag against successful trading. Again, I’m not looking for a crash, but I am looking for a pullback – healthy within the context of this global monetary policy mandated bull market. I will continue to hawk this development and update accordingly.
Stay nimble. Setup bias can be transient. Reaction and flexibility. Shadows and dust.
Bear Flags: $HW, $HYH
Parabolic Shorts: $MLM, $IRM, $CONE,
Toppy Distribution: $WY, $GIL, $HDS, $LPI, $TSE, $ZLTQ
(Potential) Lower High: $FBHS, $CUBE, $ABMD, $USG
Just watching, just because: $COT
