IWM Short and GDX MF Resilience - March 7, 2012

[Billy]

A new short position will be entered by the IWM robot at a limit of 78.65 with an initial stop 2.10% above execution price. The stop will be near Monday’s close and allows for a gap fill attempt up to Quarterly R1 (80.45) which in my view would mark a confirmed end of the pullback if it were to be broken to the upside.

We have the pullback that everyone was expecting, supposedly to allow latecomers in the rally to seize buying opportunities. But the RT 20 DMF pattern didn’t show any sign of planned buying by large players, except for the usual late pop up. However, the 50-day moving average (79.05) was broken a little bit too easily and, now that bad news will be digested, it could be retested and exceeded many times before selling resumes in case of clear failure. A potential climax and capitulation could reach the second support cluster down to the 200-day moving average (75.39).



Once again, most of the damage in GDX happened on the gap down yesterday, but the intraday pattern of the GDX MF has been basically flat and no progress was made toward the capitulation and oversold target of -1.45%. If the Money Flow improves today, we may be in for a round of patience in this trade. Monthly S2 (50.09) remains the most logical capitulation target at the second support cluster. The trailing stop was lowered to 55.63.
Billy

[Wei]

Hi Billy,

I have a question regarding IWM's stop. It seems very close this time, and it's below the very first line of strong resistance (Q-R1). Intuitively, I would expect the stop to be a little above such a strong defense not below, no?

Thanks.

Wei

[Billy]

Hi Billy,

I have a question regarding IWM's stop. It seems very close this time, and it's below the very first line of strong resistance (Q-R1). Intuitively, I would expect the stop to be a little above such a strong defense not below, no?

Thanks.

Wei

Wei,
The initial stop is 2.10% above the actual executed entry price or 80.57 and 12 cents above QR1 (80.45).
So it sits exactly where you ideally prefer to see it.
The main reason for the tight stop compared to many past trades is the low volatility. The robot also computes initial stops on short trades tighter than on long trades.
Billy

[nickola.pazderic]

Should we bail on the IWM short trade or wait until the close?

Thanks,

[Wei]

The stop has been hit so the robot will have exited already.

Should we bail on the IWM short trade or wait until the close?

Thanks,

[pdp-brugge]

What should we do with the entry of today?
This trade was triggered but the stop not yet...

[nickola.pazderic]

Yes, I forgot we are monitoring a bot. I would bet, if I were a true trader, that tomorrow will be RISK OFF.

Also, I made the mistake several times of taking a secondary robot entry when the robot was in free fall. Truth is, robots don't take secondary entries; so they are not included in the excel score sheet.

[Billy]

What should we do with the entry of today?
This trade was triggered but the stop not yet...

PdP,

As a reminder, secondary entries are suggestions for discretionary trades and are not traded by the robots.
The secondary stop was an optimal stop for the entry and since the 20 DMF is on a short mode and the IWM robot is still looking for a short entry today, it seems reasonable to hold the secondary position. But the trailing stop is your own choice and responsibility. Many subscibers do adapt their secondary stops to the official robot stop after a while, but this decision remains also discretionary.
Billy