Make The Most Of Price Action…Here’s How
Despite there being little on the HVT
front (there never is on a gap and grind, or gap and crap), there were a few
moves that produced a decent morning. The opening gap, which I mentioned in
yesterday’s column was one such trade. For me that trade was in
AIG.
Now will I be the first to admit that this trade took a fair amount of
experience and subjectivity to get me in since the S&Ps never really did fade
too much. The lesson, regardless if you took a trade like this or not, is that
since I was going against the trend, the minute the S&Ps did not confirm the
trade, or more importantly, started to move higher, you had to get out. After
that, you go right back to your standard approach, trade with the trend, which
yesterday morning was clearly up.
Don Miller alluded to this in his
column on Monday, the dynamics of the current market. For most of us, at
least in terms of the past year or so, this is new territory in terms of market
behavior. Long term is now several days. The trend, while down, trades as if we
are in a trading range. It takes time to adjust to these markets, and as
traders, we are always adjusting. Suddenly, my longer-term trades need to be
re-evaluated every other day, rather than every week or so, the price action
just changes that quickly. Buy and hold, which never worked anyway, is really
bombing now.
My point is simple. There are always ways to make the most of price action,
it just requires you to take your current set of rules and adapt them to the
current environment. I know in terms of HVT, my frequency of trades has gone
down, but not the style and set up. There are many other traders who still trade
the same frequency they did in 2000, apparently they have not noticed that the
landscape is far different now.
In fact, on Tuesday afternoon, despite having some good gains in some shorts
that I established the week before, I knew it was time to close them. The
reaction of the ISM number on Tuesday and that we closed above 854 was too
much. Sure, we may trade lower next week, but to endure the whipsaw action is
not what I want to do.
So given how quickly the landscape changes, where are we after yesterday’s
romp to the upside? Well, we still have not taken the high put in back on March
21, but that still may happen. I suspect if we clear 896, 909 will be the next
target. The other levels below will also be key not only for HVT, but for other
time frames as well. 875 yesterday offered a very clear long setup on a
longer-term time frame.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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* Indicates a level that is more significant
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