10/6/22

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 on the SPY/QQQ we had a strong move down into the 372-373 zone and then a strong reversal, ending the day close to where we had closed on the previousl day. The SPY topped around the 379 level and then moved down at the end of the day. In the premarket this zone was tested again and then this AM the market has been moving down. On longer time frame charts it looks like the market went on a strong run and is now consolidating between the 372-373 level and just below the key 380-381 level. Scenarios:

1) We move down at open and bounce at the 372-373 level and move to highs, breaking through the 380 zone.

2) We move higher at open, reject around the prior high of 379, and then move down to 372-373 where we can either consolidate or move back down to 364.

Trade Analysis:

  • Trade 1 was a trend reversal short trade. This was the 2nd leg down after breaking the uptrend, we retested the trendline but quickly and on high volume rejected instantly. I tried to get in higher but got a decent fill. I rode this down for my target at 50c, and then took the rest at over $1. This was a quality set-up and trade. Don't believe I would have done anything differently other than potentially letting my runner ride longer as there was no green candle or real reason to close besides hitting my target.
  • Trade 2 was a continuation trade to the downside. We had a long period of consolidation, the last 5 minute candle closed with a big topping tail on high volume so I got in short looking for the breka of 374 or premarket low which we were holding for a while. I got in too low and had to cut on a spike. This was a top quality set up so I took it with smaller size. Looking back I should have gotten a better entry or waited a little longer on this and could have held easier because the move eventually happened.
  • NOTES: Gray Arrow 1 was a continuation long trade after a consolidation zone after bouncing at the previous day close. We had a low volume move down testing the 20 EMA and almost instantly got bought up on high volume. I should have gotten in around 376.5 for the move up through the previous day close, could have easily made $1.5. I was talking about taking this trade with Nate and just didn't move fast enough. Gray Arrow 2 was a continuation trade after a brief consolidaiton after a high volume move lower. I was going to take this with smaller shares since it is a riskier trade but it would have worked out for 50c but that would not have been an optimal setup as I would have had to hold through some chop. There were missed opportunities today for sure. When trading trend reversals I should be more fluid with my goal, if I had held my original position for $1 I would have a large green day.

Lesson moving forward: When set-ups appear do not hesitate, you can always cut your loser. On trend reversal trades don't be afraid to aim for a larger target.