I’ve been trading in a more disciplined manner since my last post, however, if you follow me on twitter @BNGESG you know that I nearly blew up my account a few days ago on AMZN. Wrong side of a credit put spread—bad idea to be playing against the odds…especially when the option spread was a short (literally).
Since then I’ve been a little more conservative and been papertrading a few ideas, mainly with futures. The style is harmonic trading/fib retracements. They’ve been actually working out surprisingly well, or maybe my discipline has gotten better…or both.
The main one that I’ve been using is AB=CD. Without going into much details, I’ve been riding moves mid-pattern. Unfortunately everything I’ve traded (practice and real) for this pattern has been short biased. But I’m looking to try the long side in the next few days.
Below is the EUR/USD daily with some projections. The end result is bullish, but the paper trades I’ve been doing have been based on the downside of this pattern (C to D green or B to C red). The chart shows two paths—red and green. The red has an end result in a downward move, while the green is upward. And with this being EUR/USD, market bulls want the green right?
Well , bulls may get their wish since this play is still viable. The red, if it was going to work, would have bounced up at the 1.3476 area to complete the CD leg. However, there was a strong candle down in that area and now we’re headed toward a 100% retracement (from A red). My take is that we have more downside in the EUR/USD for a few more days and then the “yearend rally” begins. Obviously, when looking at the FXE and UUP I get the same ideas (reverse for UUP, that is).
Looking at the SPY and there’s a similar picture. Sort of.
This is the “Bull” version of the pattern. A lot more pain before the rally though, so it’s a bear run before the bulls come back. I don’t think this version will play out mainly because the currency charts have a tighter timeframe for the bounce. Only a few more bear days as opposed to bear weeks.
This is the “Bear” version of the pattern. A little more in line with what seems to be playing out. 115s in the SPY is .681 fib retracement and it could be a bounce on Monday from Friday’s low. When looking at the S&P futures, it looks like 1147 held, but quickly reversed. Midnight Sunday will be more telling as to whether .681 will hold. If not then .786 is next…and that’s my magic number for my SPY debit call spread. Once a bottom does put in for this projection, it’s a run up through year end, testing 2011 highs…but failing, this is the “Bear” version after all. And, so far, I think Europe hasn’t found a fix. So while they take a break for winter holidays, I wouldn’t be surprised if the drama continues when the New Year comes in.
So my plan is to wait for confirmation of the long reversal then go long with option spreads. The run up looks to be a strong one so missing the bottom by a day or two for confirmation won’t be to much of a hit on the risk side.
Follow the rules: Cut losses quickly; Don't overtrade; Take profits/sell into strength; Don't chase, watch for the pullback; Have a plan and stick to it
View my other posts/give me some advice at http://part-timepennystocktrader.blogspot.com/. Follow me on twitter @BNGESG.
Since then I’ve been a little more conservative and been papertrading a few ideas, mainly with futures. The style is harmonic trading/fib retracements. They’ve been actually working out surprisingly well, or maybe my discipline has gotten better…or both.
The main one that I’ve been using is AB=CD. Without going into much details, I’ve been riding moves mid-pattern. Unfortunately everything I’ve traded (practice and real) for this pattern has been short biased. But I’m looking to try the long side in the next few days.
Below is the EUR/USD daily with some projections. The end result is bullish, but the paper trades I’ve been doing have been based on the downside of this pattern (C to D green or B to C red). The chart shows two paths—red and green. The red has an end result in a downward move, while the green is upward. And with this being EUR/USD, market bulls want the green right?
Well , bulls may get their wish since this play is still viable. The red, if it was going to work, would have bounced up at the 1.3476 area to complete the CD leg. However, there was a strong candle down in that area and now we’re headed toward a 100% retracement (from A red). My take is that we have more downside in the EUR/USD for a few more days and then the “yearend rally” begins. Obviously, when looking at the FXE and UUP I get the same ideas (reverse for UUP, that is).
Looking at the SPY and there’s a similar picture. Sort of.
This is the “Bull” version of the pattern. A lot more pain before the rally though, so it’s a bear run before the bulls come back. I don’t think this version will play out mainly because the currency charts have a tighter timeframe for the bounce. Only a few more bear days as opposed to bear weeks.
This is the “Bear” version of the pattern. A little more in line with what seems to be playing out. 115s in the SPY is .681 fib retracement and it could be a bounce on Monday from Friday’s low. When looking at the S&P futures, it looks like 1147 held, but quickly reversed. Midnight Sunday will be more telling as to whether .681 will hold. If not then .786 is next…and that’s my magic number for my SPY debit call spread. Once a bottom does put in for this projection, it’s a run up through year end, testing 2011 highs…but failing, this is the “Bear” version after all. And, so far, I think Europe hasn’t found a fix. So while they take a break for winter holidays, I wouldn’t be surprised if the drama continues when the New Year comes in.
So my plan is to wait for confirmation of the long reversal then go long with option spreads. The run up looks to be a strong one so missing the bottom by a day or two for confirmation won’t be to much of a hit on the risk side.
Follow the rules: Cut losses quickly; Don't overtrade; Take profits/sell into strength; Don't chase, watch for the pullback; Have a plan and stick to it
View my other posts/give me some advice at http://part-timepennystocktrader.blogspot.com/. Follow me on twitter @BNGESG.
