No Perfection, Just Maintaining The Edge
Pattern develpment is great,
but once the high-probability pattern triggers…remember
that as other patterns ‘come into play’, it’s always a good time to practice
your money management skills in order to keep the edge profitable.
From yesterday afternoon, I saw what looked to be
a cup and handle developing on the 30-minute chart in the S&P500 ETF
(
SPY |
Quote |
Chart |
News |
PowerRating).
I thought the pattern was strong enough to keep a close eye on this morning for
triggers. In early trade as the futures opened essentially flat and therein
keeping the formation intact–the formal alert went out after I first posted my
thoughts to TMs chat room.
09:36:45
Extended Intraday Setup Alert
The S&P500 ETF (SPY)
is setting up in an extended 60-minute chart Cup & Handle pattern. The SPY
is up .14 at 106.51.
The trade worked out of the triggers, but the
‘favorable edge’ was only captured if one kept to the business of money
management. It’s no surprise to those who read my analysis every day that I
always preach scaling out of trades. In most equities over $20, I’ll personally
use .35 as a general rule for initial risk. To some, it may seem like too much,
but for the stocks I look at, it seems to be a good rule of thumb. If the charts
allow a tighter stop, and the volatility dictates using a tighter stop so be
it–I don’t have a problem with that, as I try to emphasize market action in the
here and now whenever possible.
With that being said, I look at the ETFs as one
of those vehicles where a tighter stop is usually appropriate due to the lower
volatility, liquidity levels, and the tighter levels of support and resistance
that so often exist. In today’s trade initial risk of approximately .20, was in
my opinion, appropriate for initial stop placement. This again is a preference
that each individual needs to determine on his or her own, dependent upon your
tolerance for risk on intraday trades. Hopefully though, the one trait that our
risk management has in common is ‘never letting a winner, turn into a loser.’
During the move up, and preceding it as well, I
made note in our members’ chat that the initial setup out of the handle breakout
could lead into something bigger– unfortunately for those that overstayed the
breakout, and didn’t respect the fresher technical perspective–I wasn’t talking
about a continuation of trade to the upside.
10:05:34
Intraday Update
The S&P500 ETF (SPY)
has set up as an
Opening Reversal short, as well as the notorious ‘broadening formation’,
after scoring fresh 52-week highs. As was suggested in the members chat–partial
profit-taking at a minimum is advised with the new price action suggesting that
this might be ‘as good as it gets.’ The SPY is up .30 at 106.65.
…and it was. Did I really know 100%–ahead of
time? Nope, but I did know how to respect the holy grail of trade management,
and look for the next high-probability setup.