I think a lot of traders will grow weary of this market. Not only are the super-computers causing absurd volatility, but it's inherent anyway in any top formation. Traders are being shaken out left and right. This is why I suggest you use an indicator like my trend channel.
There is no discernible direction I can see for tomorrow, see tonight's post at Trade guild, but today wasn't all roses either, but the level of authority to which the markets shook was nearly the same yesterday as today. The breadth readings today were not good either. However, that doesn't mean that we won't see a big bounce to make a right shoulder and form a H&S top.
Right now since I don't see a strong direction, I'd suggest laying low for a day or so and lets see how this plays out. Of course I want you to follow your risk management rules/stops, but make sure it's on a closing basis only, not an intraday break of your stop.
I listed a bunch of very speculative long trades that look like they could crack anytime. I'd suggest limiting your risk to half that of a normal position as these are highly speculative. also if you get a 15+% gift in a day or two, take it, or take most of it. These aren't meant to be trend trades, but quick pops.
As far as accumulating shorts, if you have not already done so, if you have no short position, you might want to scroll down several posts to about a week ago when I listed the core inverse leveraged ETFs we are using as a core position. You may want to build about 25% of your intended position, even if it is into higher prices (which is better for you), but don't forget about your risk management. NEVER LOSE MORE THAN 2% IN A TRADE, NVER INVEST MORE THAN 15% OF YOUR PORTFOLIO IN ANY ONE STOCK OR MULTIPLE STOCS THAT ARE CORRELATED AND READ "THE 2% RULE" AND "POSITION SIZING" AS WELL AS THE VIDEO UNDER "RESOURCES AND CONCEPTS ON THE LEFT SIDE OF TRADE GUILD. YOU CAN ALSO TAKE YOUR INTENDED NUMBER OF POSITIONS AND DIVIDE THEM INTO 2% FOR A MORE CONSERVATIVE RISK PLAN. (ex: you intend to trade 10 positions, you have $100,000 in your portfolio. Your maximum risk for the entire portfolio is 2%-divide 10 into 2% which leaves you with .002 or $200 risk money per position) THIS IS NOT $200 in the TRADE! It means if you have $.50 risk in the trade between your entry and your stop then you can buy 400 shares @ $10 or a $4,000 position.
Make sure you understand the above before you enter trades. If you have questions, please email me.
Tactically, if the SPY moves above $111, you may want to hedge out your short position with a few ETFs like FAS or UWM. A move on the SPY below $108.50 should trigger downside, certainly below $107.30. Just be patient right now. Nothing much has changed yet.
5 years ago
