BGZ Trade Update

The limit order of 73.63 should have been filled today on BGZ if it was present before 3:30 ET. Now, since I had suggested only putting in a half-sized trade, my plan is to put instructions for another half size trade over the next several days, and then use that average price for the blog trade entry price.

I read a historical study today before the close looking at times when the up issues ratio (stocks closing higher/total stocks on exchange) was less than 10% like today. If the market gapped down the next day then buying at the open and holding for 2 days averaged a 5.4% return (using SPY for the trade). There were 6 instances of this occurence in the last 15 years, all of which were positive. The 2 day return is negative if the market gaps up the next day (tomorrow in our case).

So what does this mean? For short-term traders, buying the open on a gap down in SPY tomorrow, may be a good trade for a 2 day hold (sell at Thursday's close). For the current blog BGZ trade, it would suggest having some patience on entering the second half-trade on BGZ if the market gaps down tomorrow.

So my suggestion is this for anyone still looking to add to the BGZ trade:

Place a limit order to buy BGZ (half the normal $ amount devoted to a trade) at 69.00 and hold that order GTC through the end of the week.


That should give the market room to rebound a bit and maybe get filled on the order with a short, sharp rebound. If the short-term model would happen to become overbought before that order is filled, I will post with entry instructions to use in place of those above.

As a side note, today's large decline makes in very unlikely, in my mind, that the scenario I showed in the weekend chart will occur. It would take a huge rebound to get back up to 875ish on the S&P 500.

Pete