Take A Look At This Longer-Term Position Trade
A good 10 point range on
the S&P’s was seen today, although most traders were not quite sure
if the hangover from Sunday’s big games were causing them to see “odd” events,
it was only later on that they determined that in fact a rare 10 point spooze
range was in fact sighted and confirmed by most Wall Street traders. I will
plead ignorance. For the first time since my early days as a day trader back in
1994, the S&P’s are not part of my normal screen layout. Yes, it is a bit sad
and awkward at first, but times change, and as traders we must also.
So how can one possibly trade without the S&P’s
as a lead indicator? Well, it all boils down to finding a new lead indicator.
After several months of beating up one sector, and using its’ representative S&P
index as the lead indicator, it occurred to me that perhaps this same strategy
might apply to sectors like the Oil Drillers
(OSX), Retailers (RLX),
Home Builders (HGX) etc etc. Use HVT
techniques and trade the underlying stocks of that sector. This concept does
not deviate one bit from the origins of HVT trading, it simply applies them to
different markets. Pull up a 1 and 5-minute chart of these indices and compare
the 1 and 5-minute charts of the leading stocks in that index, you will notice a
solid correlation. One thing remains constant: focusing on one sector and 1 to
2 stocks ensures the best chance of success.
^next^
As traders however we are left with one dilemma.
What do you do with the remainder of the day? Simple, manage open FX trades.
This market is moving and does not require you to be a prisoner of your
monitors. I caught the Euro (EUR) on the
long side yesterday morning and was in the trade for just over 3 hours. Never
once did I worry about stepping away. I had stops in place (guaranteed by the
way in FX) and adjusted them higher as the trade went in my favor. In the end I
took in 52 pips and stepped back to re-evaluate. There were some other trades
that came close to setting up, but no such luck. However, 52 pips equates to a
solid showing in FX land, so the urge to press was simply not there unless a
good trade showed up.
For those who may have an interest, I established
a long-term trade in the i-Shares Japan Fund
(EWJ) yesterday at 9.81. Not only does the chart look great, there seems to be
a solid consensus that Japan’s economy might surprise to the up-side later this
year. My gold mining positions were closed out last week after a tremendous
run, and I am waiting patiently for re-entry.
As always, feel free to send me your comments and
questions.