A real slugfest as DJ continues to lead lower, SOX clings to gains and biotechs keep breaking the highs. I normally would want to be looking for some biotech to go long but that ugly exit in MLNM put the cherry on a frustrating morning, and my general rule is to keep hands off after a poor start.
Amazing, traded half the day before I even looked up to notice Dow down 300pts, I've got just about all nasdaq on my screen and they didnt trade a fraction as badly w/ exception of MSFT. Maintaining short SYMC/long CHKP; tempted to leave break-even stop on CHKP and walk away -- envisioning dow -600 by eod. Talk about forced selling. . .
Net on trades: (totals) BRCD: -.08 BRCM: -.21 MLNM: +.06 SYMC: -.32 CHKP: +1.44 NET: +.88 Thoughts (don't mind my going on, this is all for my own benefit but please feel free to comment): -- The most frustrating day I can remember in a long time. -- Nothing like a few mistimed trades early on to throw you off guard for the rest of the session. I must constantly remind myself that the first 30 minutes of the day is a really a poor time for initiating the types of trades I was looking for. -- Today's divergence in the NQ vs ES was similar to last thursday, and yet this time I didn't put any faith in it, even though many more stocks I track were displaying strength while Dow plummeted. Something about seeing a pattern happen twice in a row makes me suspicious -- and I'll admit, the relentlessness of the selloff really got me thinking the market was going to collapse. -- Seems like pair trading just isn't my bag mentally, even though it was profitable. I'm still at the point where my positions tend to color my view, and having both a long + short tied into one position just handcuffed my perceptions. I think I'd do better being wrong outright, taking the loss and going flat, and preparing for the next trade. But the market action today was definitely one where having both long and short positions simultaneously would feel like a roller coaster ride. -- I almost want to force myself to buy something after hours, because I know I will be hesitant tomorrow to go long after mentally capitulating today. Hopefully objectivity will return by the AM . . . the sour taste will linger for a while though :eek: Alright, giving myself and my 2 audience members a break and will post some review charts later. Hope all of you made out like bandits today!
A daily chart for CHKP. Using daily charts for setting up intraday trades is a somewhat dicey practice, as you really need to put faith in the larger time frame (stops naturally have to be wider than a trade based on the 5 or 15 min) or else you will be shaken out easily -- as I was earlier on. Scaling in partial buys on weakness and shorts on strength seems the best way to enter a trade, and its definitely something I need to work on.
SYMC was shorted with the idea of hedging the CHKP long. Thinking of it as a strict "pair" trade was pretty unnecessary, and the SYMC short could have just been considered safety hedge. As you can see from the chart, early on SYMC was the stronger of the two, and the breakout over 31 around 10:30 was a clear sign that this was going higher. Must constantly remind myself that I'm not trying to move 10k shares at time, and learning to be nimble enough to get out and get back in is something I have to concentrate on. As for today, "pair trade" seemed like just an excuse to hold on to losers and get greedy with the winners; I made things more complicated than they needed to be and paid for it in opportunity cost.
EBAY was one I noticed but didn't act on; after my morning trades I just didn't feel like pushing. Chart divergences are capable of identifying opportunities every day in a variety of stocks, but keep in mind that those specialists whose eyes are glued to the same stocks day in and day out will always be one step ahead in terms of time & sales, volume, level 2 changes, etc. Your advantage is in minimizing risk by buying after a market stumble or shorting after a surge (which comes naturally with divergence trading), so let the trades come to you and forget the ones that have left the station without you (lecturing to myself here).