Tuesday, February 5, 2013

IWM / Futures Update

The IWM trade from yesterday worked out well so far, I closed 75% and left 25% open.

 Keeping the profits on these short term option trades is what is important, volatility plays a role, understanding about how much of a move we can expect and what the market environment is like is also critical. A 50% gain is no record setting gain for an options trade, but for a solid signal given yesterday and less than a day of exposing capital to risk, it's a great trade and it's one in a long line of these  1 day quick moves which is less a function of my choosing and more of what the market is offering.

 Just like earlier, Es is still negative so I'm leaning toward this being a persistent negative divergence which (at least on the 1 min timeframe) we only see in the futures and it has been a strong signal both bullish and bearish as well as somewhat rare.

 The NASDAQ 1 min futures were exceptionally clear about their positive divergence yesterday, they were somewhat in line at the open although negative from the accumulation area running through approx. 12 a.m. EDT (to the far left). The fact these futures are not confirming is bothersome.

 As for the IWM, much like the head fake move and gap in the QQQ, the IWM had a similar move and just like the QQQ which we predicted would fill that gap, the IWM has down the same today and met resistance there.

Gap resistance or support for that matter, is some of the strongest I have seen on a consistent basis. The IWM ran up and formed a flag pole early on when the NASDAQ futures were still in confirmation, then the IWM hit resistance as the gap was filled and formed a flag, the futures went negative there. As far as the price pattern, regular technical traders see this as a perfect bull flag, volume and all so there's going to be some expectation of a breakout to the upside from here, that is why I'm willing to leave some open still, I suspect it would be a head fake move, but a move nonetheless.

 As mentioned, the volatility isn't useful for anything really except quick in and out trades, it's not adding to any stable trend. Considering volatility shows up near the end and a lot of other indicators are falling apart, the "BlackSwan" factor is increasing.

 The 1 min chart and consolidation

 The 3 min chart with the head fake and gap filled, look at the size of the accumulation, I could see that position near distributed by now.

 The 5 min chart and an in line status, this could go either way fast, it went leading negative very fast at the last run up.

 At 10 mins, there's not even a very fine line between this move up and serious negative damage and tone.

The 5 min intraday indicators have lost momentum, MACD and the embed on Stochastics isn't very strong here.

Hopefully we get a decent head fake pop to sell in to and consider adding or starting a position in SRTY if you like the IWM as a leveraged short which I do,

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