Thursday, January 17, 2013

Didn't expect that..

Decisive move to the upside, in my face!

So, I've been prophesying a sharp snap to the downside for the last few days.. I was wrong.  Obviously the market rallied today despite my expectations.  So be it.  Fortunately I was not in any un-salvageable positions, and I was fortunate enough to have some time to watch the market during the first hour and a half. That allowed me to employ some new day-trading techniques I've been looking at, and I'm going to share them with you tonight.  But first, the daily scores:

Now for the interesting part.  Regular readers will recognize my affinity for Heikin Ashi candles.  I love 'em.  Last week I posted an illustration of the "twisted ribbon" that I look for with Heikin Ashis that shows the market an an inflection point.  Once the candles get compressed, the favored direction of the market is shown and a play can be made.  Check it:

Here is what I saw just prior to the market open (lighter shaded region is post / pre market trading.)  From this, I thought the market was poised to open higher and then quickly reverse course as it has done all this week:

Here is what I saw on the first few minutes after the open (this is a 15 min chart).  The opening candle indicates a moment of indecision in the market.  Based on the initial move of the market on the chart on the 5 minute chart (not depicted) I bought a Put on the $DIA.  However, note the lower oscillators have taken a positive slope.  Now, I'm thinking the bias is to the upside.. may need to neutralize my trade.

 This is where I got nervous about my trade.  Below we see a lower wick of the candle that is higher than the previous, a body that is higher than the previous, and a top wick that is ever so slightly higher than the previous.  RSI, Slow Stocastic, and MACD are upward sloping.  The MACD histogram has stopped declining.  I'm a bit concerned now..

 Here's the coup de gras.  Large body candle, upper wick way higher than the previous...  I'm out.  Purchased a Call to neutralize the trade for the rest of the day.

And here's the rest of the day.  The decision to neutralize when I did was a good one.

So, I was wrong about the timing of the snap back.  Do I still think it will happen.. of course.  I would definitely not chase this trend... there will be plenty of more opportunities to get in low and sell high.

Hope you enjoyed the pics!


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