10/5/22
Grade: B+
Goals: Be more selective and raise winning %
Reminders/Aphorisms:
- Don't fight the trend;
- Be patient, take good set-ups
- Respect at least 2:1 R/R
Overview: Yesterday was a bad red day where I broke almost all of my rules. Will need to reset today and take it slow. Yesterday was a strong green opening move on the SPY/QQQ followed by long ranging/consolidation periods which did not lend themselves to trading and that is why I got chopped around. However both the SPY/QQQ made a higher high on the daily charts. Overnight and in the premarket both the SPY/QQQ moved down a couple of dollars. There are a couple of potential scendarios for today:
1) The SPY moves up at opens and tests the 377-378 supply zone where it topped out yesterday, rejects hard and moves down to the 372-373 level which had been important in the past. From there it will likely consolidate, as the next level down would be 362-363 and this would be too big of an intraday move.
2) The SPY dips at open and tests the 372-373 level and then has a strong move to the upside, with an important break level of 377-378. If we break that level with volume/strength the next level up would be 380-381. Seeing how we've had two strong days in a row this is possible, but I feel like the market may need to blow off some steam.
3) The SPY could bounce around the 377-378, and 372-373 level all day and be undecided in where it goes. Seeing how we consolidated around the 377-378 level all day yesterday this is a strong possibility.
Trade Analysis:
- Trade 1 was a continuation trade for the downside. We had gotten some green relief candles that tested the 9 EMA and rejected pretty quickly. As soon as I saw that I quickly got into the trade short looking for my standard 2:1 R/R (50/25c). The trade move down pretty quickly 20c then stalled for a bit but I held for the target and was able to get 50c on my partial (35 shares) and then took the remain 15 shares at $1, making this a pretty big winner. This was a quality setup to take.
- Trade 2 was another continuation trade for the downside. We had a long period of consolidation and we were forming a wedge with a flat bottom. I was anticipating the breakdown of the wedge to the downside, looking for 50c and risking 25c. As this was a riskier trade, betting on the breakdown of the wedge, I only took 35 shares. I may have gotten into this trade a little early as it tested the downtrend and 20 EMA before moving down. It tested my risk but I gave it a couple more cents as we were at a whole dollar level. It then moved down pretty strongly and I was able to take profit at 50c. I took the remaining shares off on the first green candle to appear.
- NOTES: Gray Arrow 1 was a missed continuation trade, we had a break of a wedge to the downside and this was a pullup that was being sold into, I would have risked 25c and made 50c. This was a decedent setup on the 1m. Gray Arrow 2 was another continuation trade. The price action had been consolidating and failing to make new highs. Off the rejection of 20 EMA I wanted to get in but I was uncertain about it and did not pull the trigger. Again I would have looked for 25/50c R/R.
- After a terrible day of no control yesterday, this was a nice recovery. If I had stuck to my rules yesterday I would be green on the month today but at least I recovered a big chunk of my loss. Two winning trades and then walk away.
Lesson moving forward: Be patient and look for setups. When they appear, don't hesitate and take the trades.