5/14 DIA 41-Day Double Diagonal

Not much change from Yesterday. Only thing to notice is that DIA ended the day flat and that volatility dropped, taking some of Today's theta profit from us.

5/14 RUT 50-Day Condor

RUT got back to the 480 price zone Today. I'm still weary of the down-side risk on the trade and am ready to get out of it if we start dropping bellow Today's low. See my technical discussion posting for more details. For now, moving to the up-side and staying flat are good options.

05/14 RUT Technical Discussion

I'll start to add some technical analysis to my trading blog, this will allow me to capture my thinking process, and possibly lead to some interesting opportunities for directional trades.

First, let me start by saying that I use Fibonacci Retracements quite a lot, I added a posting explaining it on the "Technical Corner" of the blog. Ok, let's take a look at Today's action:

First thing to notice is that Today's up-swing while welcome, can be interpreted two ways: a retracement before continuing down, or a reversal back up. Tomorrow might tell us the rest of the story, but one way or another, let me look at possible price targets for Tomorrow.

Before we continue, one thing to remember is the Friday's are usually low volume, and many times the markets tend to move sideways, that is even better for the position.



The Down-side possibility is a continuation towards 460/450 area, this would continue to fire up stops from the people that are still holding their long positions, so I'd expect the down-side to have some resistance, but based on Yesterday's action, not too much resistance, given the down-side seems to be much faster.

The up-side will also face some resistance. You can see that Today's price action gave us a break of the SMA21 and a Fibonacci retracement, so it can continue to push higher, possibly reaching the SMA 50.

Always a good idea to also look at the bigger picture. I'm a bit more concerned about the down-side when I see the daily chart. Notice how the up-trend was drastically interrupted, firing up past the SMA 21. Today we reached the SMA21 and faded from it, this could possibly be a re-test before continuing dow.

If the bulls take over, they'll have to push RUT past the SMA21 once again before they can gain the upper hand.

On my next postings I'll look at what this means to my RUT HP.

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.