I got burnt yesterday. I made a rookie mistake. I thought I had my stops in [But I didn't :(!) ] and the market ran against my shorts; and they were handed to me big time. With the run-up into the close I hesitated selling them after-hours. I did have a BGU hedge in place [thanks to Tom The Traders expert tape reading] which took away some of the sting. I held overnight, and after a fitful sleep woke up to find that the futures were in fact down. Yeah! I decided to wait until market opening, taking a chance on the JP Morgan announcement, thinking that the any opening gap up would most like fade. That in fact is what happened and I cut my losses in half, yipeee I lost less money, but I took a winning trade and turned it into a painful loss!
This trading boo-boo is not the point of this post, I only confess it to hopefully drive the lesson home to myself, and maybe others. The point being:
always, always, always know your stops; and always have them in place when you are not there and if you are there, honor thy stops. No matter what, no exceptions.
My next step:
I am a bull. I think the market has seen its low, but I want a test to prove it. That means for the short term I want to play like a bear. I want to continue to short this market but my target has moved to the QQQQ's. As of 2:30pm on Thursday, April 16th this is my game plan. First here is the chart I am working off for my plan:
This run-up from yesterday's (tax Day's) low should be between 5%-6%, like the other legs up in this current rally. Unless we get some market top blow-off, in which case it will blow through, that would put a top target around 33.75 (QQQQ). This top should complete itself between today and Friday, April 17th. After the top is complete, It should re-trace, and this time the retrace, because of the weakness in the up-leg should retrace should equal the push to the top. This re-test of 31.83 (QQQQ) on the retrace should set up the direction of the next leg.
This time instead of the financials I will be targeting the Nasdaq. I will use a combination of QQQQs, QLD (the 2X Nasdaq) and also the small cap 3x TNA. I will begin building my position at the 33.50 area become more aggressive as the price approaches the 33.75 area, buying all the way to 34.00.
I will post my positions at the end of the day..... (to be continued)
It is 4:52 and this is what the charts looked like at the end-of-the-day.
For SAG I am posting the QQQQ's on the Zweig Breadth indicator. If you have read any of my post you know that I discussed this indicator previously. You can catch up on the indicator by going here.
I was watching the ZBT during the last few minutes before the close, it was so near to being overbought it had me mesmerized. It is so close now that I am going to call it overbought, after all this isn't rocket science and like horseshoes and unlike most things in life, close counts. Certainly if we are hunting bulls with the bears this the right region to be in.
During the after-hours Google announced good results for the 1st quarter. This prompted me to start building my short position at the 33.50 area. The Q's hit a high of 33.43 and closed at 33.23. After hours, with the Google announcement I opened a tier 1 position making me 50% short with QID @ 39.71.
-RLT
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