2 of 2: Revisiting Strategy that Makes the Most Money

First to get the negative characteristics of SPY out of the way.

  • SPY is a meat grinder. It rotates and doesn’t advertise the same way a strong or weak stock will.
    It is a day trading vehicle for supplementing returns in a small way.
  • Risk in SPY should be less than risk in a stock given equal conviction in the setup.
    -Stock setups are usually built on higher timeframes and tend to work in my favor more often for more return/risk than a SPY trade
  • Stick to waiting for those opportunities where strong charts are breaking out/backtesting important levels and the broad market is in sync.
  • The bulk of the money is made in the middle of the move. Much of your profits you will not see, but what you gain from not taking on risk in no man’s land spots is very real.  The context of this statement is thinking about the broad market and not being caught with too much long risk when things are extended.

I am mad at myself today for risking more than the usual for a SPY trade. A loser will hunt for the next idea immediately, the next trade immediately, the next fix immediately in order to cure what ails them, only to find more loss.

The opposite action to take that energy and use it to learn from any mistakes made and improve on the process.  To be patient for the next opportunity.  They always eventually show up.  The winner is mentally fit, mentally prepared, and confident in their ability to execute well when it’s time.

1 of 2: Market Short (SPY) For a Loss Today

Very frustrating to see what I believe to be a very high % opportunity as a day trade and have it not go my direction.

Here’s what I saw in the $spy short below 179.
Image

Internals
Image

Broad Mkt (photo not the market profile chart I usually watch but will have to do.

Image

I gained conviction from seeing sellers keeping price below the 179 area.  Tick kept banging away and so did the AD line.  I had a strong conviction that price would at least visit 178.5, probably lower.

After seeing IWM trade all the way down to the figure, the dow making a higher low with a north east slant, and SPY hold after making a new low I bailed at the figure two time.  My biggest winner was only 10 cents and the plan was never to begin scaling out for 10 cents.

Sentiment Sure Flips Fast (TSLA)…

Hovering over yesterday…
Image

and now today!  Hmmm…..  Momo is as momo chasers does

Image

Sentiment compliments of hedgechatter.com

One thing I’ve noticed with sentiment in TSLA is that the bears are extremely weakhanded and only come out after plunges in TSLA.  More noticeably they run for the hills on any uptick.
Rightfully so they should be scared as every drop was bought until now.  This is what the market does.  Gets things really lopsided one way and then as quickly as possible pulls the rug, leaving you down, out and still holding on to that bias of yours…. TSLA sure looks like it has had it’s back broken.  It’s going to take a lot of constructive price action on to rebuild a bullish chart on the weekly.

Today’s open was a massive and sharp rally taking back over 1/2 the losses in TSLA from yesterday’s trend down day.  We shall see how much of it turns out to be weak shorts.
Position: Still holding my 25% of my put verticals 135-125 / 135-130.

Position Update / Mkt Outlook

Think it’s pullback time. Am still holding ~25% $TSLA short (which certainly had it’s back broken today).  No stock only verticals for next week expiration.
Based on the PA today in $TSLA, it seems both the 50% retracement level and 200dma at $110 will be a price magnet.

This is a raging bull market and it’s easier to trade from the long side.  I’m focusing my energies on passing CFA level I in December, and waiting out this pullback (which may never come).

I will be most actively managing $TSLA short, and looking to add in a low risk spot if I can for a move to $110.  Also short $FB today as a new position. 
That’s my laundry list.  Keep it simply.  Wait for opportunity to show itself.

Check out the bearish sentiment levels.  By bearish I mean pay attention to the level of bears in red.  It’s the most significant.
Image
Chart provided courtesy of DecisionPoint.com

Here’s the FB chart(s) – break of $45 is what I would like to see.  Risk 1/2 percent.

2013.11.18[21.24.23]_TC2000 ®

Still Taking Less Long Side Risk

While I am long some names I am still holding off until the market gets at least a 3% pullback. I’ll may post bull market stats in the morning but basically 4 percent is the sweet spot.

Sentiment is at extremes and it pays to be patient.  Pandora is one chart I will be definitely be trading from the long side on this break.

Image

Thinking In Terms Of Efficiency (and NSC long idea)

While I don’t mind the AAPL trade it perhaps isn’t the most rewarding in terms of time and energy involved in playing a breakout trade in EITHER direction without much of a clue other than the LACK of movement or consolidation for an extended period of time for the security.

Take for example the strength in transports, especially rails and NSC.  As NSC continues to behave well after surging I continue to accumulate both common and calls going into December.
I know my direction, and I have conviction in the trade.  Compare this to AAPL where I am playing both side and have to adjust when new context develops on either a rip or dip or I lose when the stock consolidates for the next 2 weeks.

Some trades are better than others, and going hunting all day it’s easy to shoot at anything that moves (or doesn’t).  One of the most important aspects of being profitable is the ability to do nothing.

Image