Tuesday, February 23, 2016

Today in Trading 2/23/2016

To quote the famous German filmmaker Werner Herzog,

"I prefer to be alive, so I'm cautious about taking risks"

Although you can't make any return in trading without risking something, there is a time to risk and then there's a time to be alive. Today it feels good to be alive. Oil got demolished.

To quote someone else from yesterday.

"Like always, be on the lookout for anything someone from Saudi says about oil. It can change all of this in a matter of minutes. I am not even in a position right now because oil is still in no-man's land. When in doubt, just be out."

And sometimes in the investing and trading world being cash when unsure of a trade is better than a high risk shot with uncertain direction. Just don't do it. That is gambling. A long in oil today would have been murdered. All it took was one little sentence from one very greedy Saudi to send oil running for the day. Thanks bro... It ended up being a great day for the shorts which was topped off by an inventory build from the API report at 4:30pm. The chart ended up taking a resistance leading trade and wiping out the support, during consolidation, almost immediately...He says allll the right things....at exaaactly the right times.... I feel like I need some thicker foil for my hat, it's literally falling apart.

I will dedicate an entire post one day on how to interpret these reports, as there are many factors that determine bullish or bearish from a build. Sometimes a build can be very bullish if it implies someone is pumping more to anticipate more demand in an under supplied market in a January, but an inventory build can be extremely bearish in a January when producers have full tanks and there is an oversupplied environment. This means that the demand isn't outgrowing the current supply. The same number have different interpretations in different environments. In this instance today, Wall St. didn't seem to think it was all too bullish at all. Here was the call from yesterday where I was cash waiting for the reports to come out. I don't trust any Saudi meeting right now and now the price action today after both major news events is this. Don't let me be the first to tell you what's going to happen next. Take a guess.

Now as oil was in the middle of still fulfilling it's multiple resistance bounces in this consolidating triangle in what I'm still calling no-man's land; I'm still not chasing it--I'm waiting. And instead of risking my money there I happily watched from the sidelines while managing the sale of my massive long position in equities and ETF's that I stocked up on from the SPX 1800's time. This ended up actually being the biggest swing trade I have made in my life in a single week-ish run. I find it tacky to speak about money so I won't tell you how much, but everyone in chat heard me jumping up and down when I pulled in close to 50% return over a handful of carefully planned swing trades over the course of a few weeks... no not 50% on a trade--close to 50% on my account. This is what leveraged ETF's do. I could have just as well lost it all as well but of course I had stops in place. See, when we called 26.20 as an oil bottom I felt so confident about the trade (and my stops were so tight) that I felt that my risk was negligible compared to the possible return and I was just about all in long, with no hedge short to ride this bump up. We document all of our trades we make in our chat so I was calling all of my entries as I made them...

It's not always like this, most days I'm grueling out wins and losses just like the next guy. But when you see the perfect setup that has very low risk and you time your entry right, and you have your safety net in place and you trust your discipline, take the trade!

So for the SPX, here was yesterday's optimistic chart for a continuation up to at least 2025 but we ended up here Again Saudi Arabia, thanks for being the oil dorm's RA. Sorry... I'll turn the music down. My confidence in this move is now half what it was yesterday. It's still possible to move up from here, but the price target will be a tad lower when I figure out what it is after a day or two more of trading. Remember that for now the SPX is still no man's land because if you draw a fib from the 2050's gap down to the 1800's bottom, the middle is... do the math, 1925. Retraces are very common in very large moves, and at this point is where people will be starting to bet again.

We've been hovering 1925 +/- 20 since Friday, so it's anyone's game at this point. I'm very confident we're entering a bear market, but will it fall straight down from here? I'm still not certain the leg up is over until we close Monday's gap up from Friday and re-enter the sub 1900's range. I suspect a few more strange up and down days in this range might be it. I feel like chasing is a loss, so I recommend cash.

Keeping today's analysis short and sweet, all things are in no man's land, seriously sometimes it's better to have a sandwich than it is to lose money. Tomorrow at 10:30 is the EIA report, and with a move like today I wouldn't be surprised if the DWTI players attack it full force, bullish or bearish. I'll likely consider making more trades post-report.

Like always... have a great night and happy trading.



Submitted February 23, 2016 at 07:27PM by gabriel87120 http://ift.tt/1QZFx5H

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