Category Archives: Analysis of Individual Trades
As planned, I closed my SDS trade at the close.
My average entry price was 20.25. I sold it for 20.57, for a gain of 1.6%. This small gain is nothing to brag about. The only reasons I’m writing about it are because I blogged about entering it-only fair that I blog about the exit- and because I’m not very good at discretionary trading. This trade was managed well, no emotion, no panicking, and I’m rather enjoying the fact that it was well-executed. Perhaps I’ll attempt more in the future.
Just a quick note this morning as I get my positions for the day entered. I’ve set a hard stop to buy-to-cover my [[SPY]] short. Yesterday evening, and this morning (when futures were up) I fully embraced the pain this position was causing both my psychology and my account. The losses now have a firm value attached, and they are still within acceptable limits (I wouldn’t have allowed it to be any other way).
I did not have time last night to run any studies, so I’m flying blind in regards to any short-term edges after a move like yesterday. The plan is simply to see if I get stopped out or not. If I do not, I may begin to trail a stop as early as this afternoon.
I am entering into four small feeler short positions in individual equities. I still refuse to buy this market and will continue shorting small amounts until my losses cause me to shut down for a few days and re-evaluate, or until their is a pullback.
I know…I sound like a broken record. I added 15% more near the close, paying $95.09 This block was not added due to any system or known edge. Simply, I’m already very short, and the SPX is approaching a level where I will cover my shorts, accepting the losses, in order to not suffer anything more severe or crippling.
My thinking was to add more exposure as I can take comfort in knowing that if the melt-up continues through tomorrow’s close, the last block will not make a huge difference compared to the previous two blocks.
Barring a catastrophe for the bulls, this rather large short position will not likely be closed for a profit. However, I am hoping that I can at least exit the position with my dignity intact. In other words, it would be nice if I could have at least ONE DOWN DAY to cover into. Is that too much to ask?
Also, look at the volume, or lack of it! More than anything, the Nasdaq being up 9 days in a row, Dow getting the greatest percentage gain since whenever, it is the lack of volume that I think should be of the greatest concern to the bulls.
If anyone starts selling in size, there will not be anyone to absorb the shares.
Anyway, just give me my stinkin’ down day and I’ll shut up.
On the afternoon of Tuesday, July 7th, the SPY had shaved two points from its value, and the SPX was going to close beneath the 200 day simple moving average. The bears were out in droves, marauding and eating pic-a-nic baskets stolen from frightened bulls.
In the comments section of Fly’s blog I remarked that it was time to go long, and that I would do so, on the next open, at 25% of account value. Some traders agreed with my assessment; others asked if I was serious. Unfortunately, there was a select group who felt the need to berate my call.
No big deal, really, to be challenged on a market call. It happens a good bit around here. Often, I welcome a good challenge, as having to stand for my convictions makes me a better trader and system developer. So, In order to respond to the negativity and excessive bearishness in an appropriate manner, I did some testing and wrote this post: No Wonder 95% of All Traders Blow Up.
The post was meant to be provocative, and it certainly achieved my objective. However, what good is an unpopular entry, if I do not get to follow the trade through to the profitable exit?
Of course I did not know for sure whether this trade would be a winner or not, but I knew the odds were on my side. To be honest, there were several times when I was fairly certain the trade would be closed for a loss. But that is the thing about trading with the odds. If nothing else, trading with the odds gives me the conviction and staying power to see the trade through to the planned exit.
My SPY position will be sold this morning.
Should the SPY close higher today (Tuesday), it may be worthwhile to review Rob Hanna’s system for shorting when the index has closed up 2 days in choppy conditions. That’s right, I’m insinuating that it is getting to be the time to build short positions, just when many are getting excited about getting long.
Everything I’m seeing in my screens leads me to believe the conditions are ripe for a bounce here. We’ve got multiple leaders and indices above their major moving averages, but in short-term oversold conditions. That is a recipe for some trampoline action.
Remember when I went short the SPY on the open? Some traders here (ack, cough, Fly, cough) questioned the move. I will cover my short on the open tomorrow. I’m showing unrealized gains of 1.75% on that trade.
After covering my short, I will go long the SPY, with a position size 2x larger than normal.
After putting on my initial short SSO position Friday, and then doubling it on Monday, today’s action was quite a relief. I was starting to imagine how it would feel to have my first two trades of the year get stopped out. Instead of relinquishing control and giving in to my fear and emotions, I took another system trade this morning, shorting DIG at the open.
Both SSO and DIG shorts will be covered at Thursday’s open.
As for where the markets stand…The indices are nearing a good spot to put on some dip buys, but they are notÂ quite oversold enough for my tastes. I’ll take my fat tomorrow and leave the lean for someone else.
This doesn’t mean we can’t rally from here. It just means I don’t see any discernible edges, long or short, except for an opportunityÂ to playÂ a technical bounceÂ from the 50 day moving average.
I’m not going to over-analyze things here. Today was a heck of a release after quite an intense buildup. I’m just going to enjoy the afterglow.
I do not want to leave anyone unsatisfied though, and so I want to leave a link to a really niceÂ piece from the Market Rewind blog. It dovetails rather nicely with my post last night on RSI.
In the post The Return of Strategy Trading I presented an entry and exit setup from a system that performed reasonably well throughout 2008.
The chart above shows the entry day. The rules of the system dictate closing the trade tomorrow, on the open. As this stock can open without a great amount of liquidity, I might suggest holding off a minute or two before placing the sell order. A limit order might work as well.
If one was able to get in MAXY as suggestedÂ at the open on Wednesday, December 31st, and can exit tomorrow near $9.00, the percentage gain will be roughly 5.5%