The Nasdaq 100, arguably one of the strongest indexes since the March bottom, has broken down from symmetrical and descending triangles. Dogwood highlighted the developing triangle not too long ago. This is a bearish development, but I’m not convinced that now is the time to get short.
Actually, I’m going to establish one long position tomorrow. I’m looking for another bounce, of a few days length, soon. I’m not telling anyone to go long here, unless you have a clearly defined exit for profit-taking and loss-accepting. As many have witnessed, the market has been de-banking many traders. The action has been brutal. I’m fairly sure that it is time to whipsaw some shorts for a little bit, before the NDX tests the March lows.
One thing that does have me concerned is today’s candle, and the last week or so leading up to it. If one will look at the chart above, and observe the action in late December and early January, I find it frighteningly similar to recent action. While I am positioning for some bounce action, it appears that a cliff-dive of epic proportions could be underway. Caution is definitely important here.
My only position over this past week has been [[SMN]] .
I have enjoyed watching this one position push my Covestor widget to a new YTD high. Keep in mind the account began trading on May 19th, 2008. If full disclosure is important, all of my trades in that account are available for review at Covestor.
I have been working on some short strategies, in order to get a good balance across the strategies I’m trading. I have mentioned it before, but I’ll say it again: Developing short strategies that work, is very difficult. I am curious if any traders out there would mind contributing their favorite indicator/oscillator for short entries, or would give a brief, preferably quantifiable description of their short setups. I would love to have some ideas to backtest. I will be happy to share the backtest results with anyone who contributes something that works.
Hey Wood,
Nice post. You should make it a contest, whoever can come up with the best multi-market short strategy based on some metric and time period of your choosing gets some “special” Woodshedder lovin’
So what tickles my funny bone is that I bought QLD around the same time as you, but you decided to sell before RSI(2) was > 80 and you made it out with a minor loss, whereas I’m still holding and it did a major downward tank today. Are you adding some additional criteria to your RSI(2) strategy? Also have you done any backtesting with averaging down when a purchase goes below a particular %. Right now I’m averaging down after 15% drop without a stop loss and selling when RSI(2) > 80
woodshedder, great call on going long on SKF, yesterday. I can’t believe how many comments you received on yesterday’s post.
I think IWM has short term support at 70.8. I don’t know if IWM will get that low FRI, but I’m buying if it does.
Tyler, sorry to hear that. I sold QLD early because whatever day it was last week, the RSI2 was going to close over 80. Then, on the last one minute bar of the day, an order for like 6K shares pushed the QLD down over 1 dollar. This in turn made the RSI2 close beneath 80. I took it as a sell anyway, since I felt the small order depressing the price so much was an anomaly, and all things being normal, the RSI2 should have closed above 80.
I am using a 12% stop with these double ETFs.
In testing, there have been maximum excursions in the 25% area, so hang on.
Something that might make you feel better is that I did test pyramiding entries, which is what you will be doing if you add shares here after a 15% loss. It improved the results of the system. I will not trade it that way though as I do not have the balls.
I’m looking for a bounce here. Good luck to you Tyler.
This Palin lady really gave me a boner! Discuss among yourselves.
Not to oversimplify, but just flip your long setups around & you have short ones, no?
for example:
LRCX – when it broke 37 support a few days ago
JNPR – a long dark candle on good volume 2 days ago was a clue of coming action
CSCO – a break of 24 support on good vol 2 days ago
NETL – a break of 34 yesterday
XLNX – same setup
right now: all these look like good odds short continuations
CYMI
ASML
CMI
NVLS
WRLD looks like it broke a one month uptrend & is worth a shot – all its indicators are breaking down
Check out the QLD chart, looks like support at ~ $65. Wood, are you going to wait until the $ndx is back above the trend line?
Nice SMN trade 🙂
I am curious if any traders out there would mind contributing their favorite indicator/oscillator for short entries, or would give a brief, preferably quantifiable description of their short setups.
MA 50 Crossunder
Short when price closes below MA 50
Cover when: price closes above MA 50; Price hits 8 percent stop loss; or when price hits 5 percent profit target
Year-to-date results via Stockfetcher:
Return on Investment: 23.52 percent vs -23.35 for S&P
Win Rate: 47 percent
Reward/Risk Ratio: 1.15
Total trades: 211
Stop loss triggered: 13 times or 6.21 percent
All of my posts on the system can be found here.
This system isn’t going to make anyone rich, but it does offer a low risk method for staying the markets when everything seems to be falling apart, like now.
Schit, I forgot about SNM… at least I have DUG, I guess…
And EEV
And FXP
And QID
And, my love… (no, not Sarah Palin, my other love)…
SKiFfles!
_______
You see why I liked SMN short, that thing drops off the cliff when it drops.
Any word on Fly? Was he suppose to be away today?
Hi Wood,
I would love to check out the stock fetcher code. If you already posted it to a forum on SF, a link to the post would be great. If not, please send it to my e-mail address listed.
Thank you,
Renn
Thanks Dogwood, I’ll start working with it and let you know if I can improve it any.
Renn, I’ll email it to you tonight.
Cubs, RSI2 works in reverse. ‘Nuff said.
Shedder,
Here is one idea I haven’t had time to test.
Instead of covering the trade on a close above the MA 50, would it be better to cover the trade if price closes above MA 50 by x percent? I think some of the trades are being closed just because the MA 50 is within range of daily noise, rather than an actual reversal taking place.
You also could stipulate that a trade doesn’t trigger until the price has crossed under MA 50 by x percent, maybe that would reduce the number of trades that get closed for small losses.