Hi everyone. Indexes made new all time highs this week, and my quick short trade was stopped out for a loss. Thinking back on it, I think my stop loss was a bit too close considering the extra volatility indexes have near new highs.
Notice how the last 2 of 3 times the index made new highs, the index only went a little higher than the previous high before pulling back significantly. My short trade was banking on the double top pattern as seen in the middle circle above.
If we get any sort of selling pressure in the next week, I will consider going short again with a larger stop loss this time.
I didn’t think we would get another move up, but since we did, I decided to go short. My stop loss is in the 198-200 range with a target in the mid 170s. Below is the weekly chart of QQQ.
I’m a little concerned that we will reach 198-200 before a downwards correction, but we will have to see what happens next week. By the end of next week we should see which direction the stock market wants to go. I still suspect it’s down otherwise I wouldn’t take this trade.
Hi everyone! Welcome back.
This chart should be very concerning for bulls. Each time the index flirts with new highs, the RSI is lower – meaning the momentum has slowed down. Another move upwards is not unreasonable, but I think we will see a lot of selling beginning next week, or whenever we get anywhere near 195 again.
If I take this trade, my short target is the low to mid 170s, with a stop loss roughly 6 dollars above my entry.
At the end of my last post, I mentioned that we would probably have another small move upwards before moving sharply lower. I think the trade news catalyst has sparked that rally upwards. I think it is a good idea to short at 195 with a stop loss just below 200. The year end target would be the low 170s with a final target in the low to mid 150s. The weekly bearish divergence (displaying the waning momentum) along with the index being at resistance is just too juicy of an opportunity to pass by.
I’m going to use PSQ to go short QQQ in my Roth IRA to avoid capital gains taxes. Remember that you can only purchase (go long) stocks in Roth IRAs. The stop loss on my PSQ trade will be at around 26 with an initial target at about 30. Initial entry will be at around 27 and I plan to take the trade sometime next week (assuming the index goes up).
Despite the strong move upwards on Thursday and Friday this week, I think we are likely to have another leg down before reaching a local bottom. I’ve labeled the supply zone (resistance), and the demand zone (support). I suspect we will have another small move upwards to trap the buyers before moving sharply lower towards the supply zone I’ve labeled in the chart above.
Hi everyone, welcome to the midweek update.
Above is the monthly chart of QQQ. Notice how even if you shorted at the perfect time and held it for a month, you would still be better off buying dips and selling when the market goes up. However, this current monthly candle is setting up for a good short position to be held for 1-2 months (until end of year). Note that this most recent candle is not accurate because the month just started.
Schwab just recently announced that they would begin offering commission free trades, so I’m excited to trade in my Roth IRA. I read online that brokers can easily make up commission losses by widening the bid/ask spread, so using limit orders might be the best workaround for that.
Following the Schwab news, TD Ameritrade (AMTD) stock dropped over 25%. TD Ameritrade announced today that they would also be offering commission free trades, but the stock continues to struggle. Below is the weekly chart of TD Ameritrade over the last 4-5 years.
The stock bounced off the 35 ish support level multiple times over the last couple days, but has now sliced through it. This chart is hinting at some sort of bounce soon as sellers will likely get out of the way. I think a long term position here (1+ year) would outperform the market, or at least the financial sector. Perhaps this is a good pairs trade opportunity (buy AMTD and simultaneously short XLF or SPY).
See you sometime this weekend!
Here’s the weekly chart of QQQ. I suspect we will get lots of volatility next week as a new short term trend begins. My plan to short near 192 did not happen since the highest the index made it was about 191.8. I’m considering shorting near 189 or 190 with a target at 180 instead of the original low 170s. This trade would be a significantly shorter time trade since the index doesn’t have to move as much.
Since I sold my FB shares in my Roth IRA at the start of this week, I’ve been thinking of buying PSQ – the inverse ETF of QQQ – in my Roth IRA. I normally prefer going short on indexes rather than buying inverse ETFs, but the problem is you can’t go short in Roth IRAs.
The reason for doing this trade in my Roth IRA instead of my regular trading account is to avoid taxes. Trades in Roth IRAs don’t have capital gains taxes – making them ideal for situations like this.
Above is the weekly chart of PSQ – which is supposed to be identical to QQQ but upside down.