10-12-14 Trade Plan

The bears prevented any higher highs/lows and kept the selling going with a 130m down trend.  More volatility is here and that requires different trading styles than riding up trends or none at all.  I like doing end of day index trades where risk reward is good for a one or two day trade.  Also trading bonds, oil, gold, volatility ETFs, even some shorts if there's a good setup in the liquid stocks I trade.  I'm always weary of pulling out this style of trading because it seems like when I do or think about doing it the indices reverse and it's time to get long stocks.  But it does exist, and with QE ending, IWM breaking down in a serious way, nearly all bullish setups failing, it's time to put that card on the table.


To be fair the only index in a real downtrend is the IWM, all the others are still above (or at in the case of SPY) their big picture previous swing lows.  It would only take one more good day of selling to break them though and they have intraday down trends.  Whatever you end up doing managing your risk is still the most important.  Just like buying without a good risk/reward and a reliable swing point is a bad idea, shorting without good risk/reward and a good swing point is also a bad idea.

Here is a really good losing trade from last week.  I had this over the weekend and Monday morning I get greeted with a huge gap down, hit my stop and made a lower low.  At that point you just get out and move on.  Same with YHOO, TWTR on Friday or any other good setup that fails you don't question your stop if you want to stay in the game.  You especially don't do it in a weak market.  These starter positions getting stopped out is nothing compared to the big winners that are possible.


Here's the watch list for right now at least.  I'll be trading in the volatility if opportunity presents, short term trades and these stocks are just a few I'll be watching for opportunity.  Some healthy speculation thought: I think this could really turn into an interesting market if things were to change up real quick due to lack of our fix (QE).  We would have market withdraws, that could be ugly.  Keep in mind where we are historically, coming off the largest bond buying program in history with an economy that's hardly something to be proud of.  I don't think the fed goes through with it, more QE is probably coming and they'll keep interest rates at 0% for as long as possible.  Whether you agree with Schiff and friends on the economy or not, we have checked into a roach motel.  That should be clear to everyone with a rational mind.  The question for us as traders is when does this reality creep into the market?  I don't know and I obviously don't trade based on that kind of thing, just stay objective in your trades.  Thanks for reading

Trade well,
-Michael