When working on high leveraged ETFs, it is key to keep losses small, otherwise the draw-downs can mount very fast. The original stop on TNA was around 64.49. This was a stop that only had a 15% chance of being hit on a day after a large pull-back. The low of Friday was 64.46 and that stop would have been hit.
As soon as we opened on Friday on a weak NFP report, the market dipped a little and then bounced. I was hoping for a much stronger bounce, but as a matter of security, I raised the stop to just below the morning low (as I sent out in an email.) This stop was hit and the trade was over. Usually, a strong bounce needs to attract money. If it fails, then better exit the trade. The loss on the trade was 1.28%, which was very small compared with the potential gains.
The ERX trade was more difficult as the original stop area was undercut at the open. However, we bounced and I decided to place a day stop at 112.4, to give some room to the trade. However, at 10:05, I noticed that oil continued to be under pressure and decided to close ERX on a bounce to resistance.
I do not regret these two trades. They were high probability trades and even if they did not turn out well, they were ended at minimal loss.
We now have had a sharp sell-off with the MF below -1%. For the MF to turn above -0.75%, it takes on average 6.5 days. A lot could happen in between. We can basically trade two plans:
1. Plan A: Stay in cash and wait for a bounce above -0.75%. Then, buy the best long ideas or Mike's long alert ideas.
2. Plan B: For traders who are compelled to trade (Like me probably,) then the strategy is to short a possible failed bounce, but by using ETFs and not individual stocks. Then, move to plan A.
For plan B, I intend to look at the CTick/IWM divergences such as those shown below, especially if they are displayed in the morning session. Afternoon sessions are more difficult, because entering a trade late in the day implies to bet correctly on the next day's gap.
I will also look at the 20DMF/SP500 possible divergences. We can see the the Futures are up now and I'd look a possible selling when we reach resistance levels of 1930 or 1940. Preferably, 1940! This is the plan for today. The market will however decide.
The trade ideas are below. For individual stocks, only long ideas are good probable trades for now. TSLA was discarded from the list because it is extended, but if it pulls back, then it could become interesting again.