I added more on Wednesday actually, triple sized in QQQ but also holding SP500 and Canadian ETFs. Still long.
(its getting late - I pasted a few thoughts here in the hopes that exposing some of my own thinking might be useful to someone. Not edited, rambles, but hey you get what you paid for it...)
Just for explanation, I trade futures intraday for income; ETF trading is only for our retirement accounts only although I am not a 'buy and holder' as you can probably guess. Given that I trade futures every day, and have for years, I have a pretty good feel for what the SP500 and NDX are doing.
The roadmap I had in mind was formed not late in the day but on the test of bottom on the 45M chart. Tests such as these, especially when done after an extended decline, have to be traded and in full size.
After 9 weeks down in Nasdaq, with so many disappointments for many traders and investors along the way, the last few days on the gap down most certainly had all the qualifications for "exhaustion" - yet another reason for full size.
From:
Message 19951528
My guestimation of what could happen if price closes up higher today:
trendvue.com
Orange "bars" on the right hand side are just guestimations, not predictions. A strong close would open the possibility for a gap up tomorrow which would of course set an Island Reversal on the charts. I think after 9 straight weeks of selling in Nasdaq that there would be some significant short covering.
The nice thing about going long earlier today was on larger time frame intraday charts a signficant test of bottom on the SP500 futures was put in - its a good "line in the sand".
What's really funny is that the orange bar I drew in as a guess for Wednesday was almost dead on the actual bar for today.
Anyway, point of the long reply here is that the Island Reversal will be seen by many as an 'all clear' for now; the huge up day today will have that effect as well, although its interesting that many retail traders and investors, who really want a rally, seem to be doubting this move. By the time they are 'believers' no doubt the move will be over.
What I wanted to bring up was the "exit". Not knowing how your system is constructed I can only comment on my observations of your entry and exit calls. It seems that your method generates useful signals; I wonder if perhaps it exits too soon.
I can't predict with any certainty that price will move up another X%, and whether it will do so in a straight line. I can say that from experience it makes no sense to cash out with my ~ 3% gain now, given the very low risk entry point and the nature of the setup.
Sure - perhaps the market will just sell right off and stop me out at my b/e stop (break/even), but given the framework here on the charts - an extended decline, an exhaustion gap, and a solid reversal, the market is more likely to move directly up or pause and then move directly up.
The crux of the matter is this - most "swings" in NDX/QQQ so far this year have been >= 5 days in length. When price is very directional, the swings are far longer - this year two 10/11 day down swings. December had a 20+ day up swing.
Therefore, if you are trading in the direction of a trend, it makes sense to hold a little longer once in the money. Of course this current trade I am in is counter-trend so I will have to be a bit more ruthless with my exit, but for reasons I've explained, I think there is reason enough to expect this to at least attempt a solid reversal. Its worth the gamble of profits at least, not base capital.
Given that this trade is unlikely to stop me out, it makes more sense to let this run for a few more days (evaluated each day of course) before coming to any conclusions.
A trade like this should be good for 10% or more if it can carry on for several days or turn into a multi-week swing up, perhaps with a number of swings on the daily. I would think that if the Mar 17 swing high is cleared Fri or Mon, and any retracement over the next 1-3 days does not dip back into the 3 day 'island' below, then its very likely price will push up at least to the highs at the start of March in fairly short order.
So... holding. |
