05/13 DIA 41-Day Double Diagonal

DIA pushed down Today, it is right in the middle of my profit chart, the "bearish incline" I did with the trade seems to be paying off. Volatility also moved up, which helps a bit as well.

05/13 RUT 50-Day Condor

Ok, I now have one certainty about this trade: it give me profits. I just don't know exactly how much yet, it all depends on how RUT behaves in the next few days. I've reached the Tighten The Noose level and am therefore am protecting profits on the position. Should we continue to drop $$, I'm on my way out.

I did a technical study on the 1-hour chart for RUT's futures contracts, this gives me an idea of where RUT can potentially move to. All I know is that I am not allowing this trade to even think about giving up profits.

05/13 RUT - Technical look 1h chart

I'm looking at the 1 hour chart looking for clues as to what is the next probable move for RUT. It broke the past up-trend and now I'm looking for possible "stopping points". I believe it is due to a retracement, Today's movement of 2 st. deviation is likely to leave people itching to take profits, and that could swing RUT back up to the 480 zone.

Now, if we don't even look back, that is not a good sign, it will indicate the bear is out and looking for food.

I'm attaching a few 1-hour chart for further discussion. I'm using the Mini futures, as they provide 24h trading and one could see what overnight sentiment was (if any).

First a "longer-term" view. Notice that the 475/480 price zone was the resistance to the previous up-movement, that in itself would be argument to expect it to be support as RUT comes back down.

Now I'll post a few charts with possible scenarios.

My VIPES spreadsheet Explained

I have been posting my VIPES study on the blog without further explaining what it is and how I use the information. This post provides detail explanation on what it is and how I use it.

First and foremost, VIPES stands for (V)olatility, (I)ndustry, (P)rice, (E)arnings and (S)kew. This is a concept I learned with Dan Sheridan on his mentoring program. It is a way for traders to evaluate a stock/etf/index before placing any kind of income strategy. I won't spend too much time on the details, but in a nutshell, it forces you to look at the potential trading candidates with a bit more detail.

I have adapted a spreadsheet to help me with 2 elements of VIPES: (V)olatility and (P)rice. My goal is to look at a several potential candidates and filter the ones that are not moving too much. So let's look at the chart and I'll explain it:

The first section of the sheet studies 1-day Price Action. I look at how many st. deviation the candidate is moving lately. The questions I'm answering are: Has the candidate moved 1.5 or 2 standard deviations several times in the past 30 days? How about in the past 90 days? For each candidate It will show the number of times and percentage of times these type of days happened.

So, If one candidate has moved 2 st. deviations for over 5% of times in any period, It suggests it is not behaving as per the "normal distribution", so the warning light goes on.

The next section looks at how many standard deviation the candidate has been moving for a 5-day period. Each bar on the chart represents a 5-day period, so if the candidate has been moving 1 or more st. deviation for 5 days, it is also a warning sign that it is not so quiet.

Let's look at an example:

You can see from the two charts bellow that SPY has a better price profile, it has not moved over 2 st. deviation more than 5% of the time on both the 90-day and 30-day periods, not the same story for USO, it has moved 2 st. deviation 7% of the time in both periods. Looking at the 5-day chart, you'll also notice that USO hav moved 0.5 st. deviations for the 5-day periods several times in a row very recently, which didn't happen for SPY.

I hope this helps, if not, please ask your questions and I'll do my best to answer.

VIPES as of 05/12/09