Sunday, May 31, 2009

Not Sure About the BGZ Price but Suggest Maintaining This Trade

I'm hoping to get a video post up tonight or before the open tomorrow, but in case I don't, I wanted to get this post out.

I am seeing conflicting data on the price of BGZ toward Friday's close. When I zoom to a 1- minute chart, it show the low as 36.04. Also, during the last few minutes of the day Friday and even right after the closing bell, I saw no quotes below 36.00. However, I have seen the low on some daily charts quoted at around 35.70. So, I honestly am not sure of what is the "real" quote and if anyone got stopped out because I was not using a stop.

In short, I feel that going without a stop and waiting for a short-term model oversold signal to decide whether to hold or exit will be the strategy that will make the most money. I absolutely will not trust any breakout to a new high on the S&P over the couple days. The short-term model is showing a significant (in my interpretation) bearish divergence with the last overbought signal.

Also, if I get a video up I will try to get into this in more detail, but it seems that the sharp vertical move in the final minutes Friday was almost exclusively a running of the stops on short positions causing a huge volume short-covering rally just before the close. That should remove a significant part of any potential upside for the early part of this week if short-covering was indeed the main driver of that move.

So if you were stopped out then I would suggest getting back in ASAP, and if you had a stop but were not stopped out, I am removing any official blog stop on this until further notice.

3 comments:

  1. In the last 10 minutes of trading, S&P 500 e-mini futures rallied 17.25 points on approximate volume of 356,300 contracts, or 19.3% of total turnover for the entire trading day.

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  2. Well the market is obviously set to make a sizeable gap up today/Monday. From Sentimentrader.com, the suggestion is to beware that whatever breakout occurs from the recent 4 weeks trading range has historically tended to be a false and relatively short-lived breakout before a somewhat larger move in the other direction.

    Again, from my data I don't think that anyone would have gotten stopped out on Friday, but if so I will be looking for the next potential short-term trade, and would suggest re-entering BGZ at that point as well.

    I would think that a move up to new highs and beyond will be pretty fast and scare a lot of short positions out. I don't know in that case if BGZ would be close to profitable by the next short-term oversold signal, but it doesn't make much sense to me to panic out of an inverse fund this morning. It may still make sense to exit based on money management and then be ready to get back in at the next appropriate signal, but I would like to get some more info and see how a large opening gap at these levels is greeted.

    A move to new highs looks like it will set up a significant bearish technical divergence on the DAILY chart; as I had said before, if this trade didn't catch a "top" I would feel even more confident that the next one would.

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  3. Short-term model for both S&P and Nasdaq is now just touching overbought. From the extreme momentum type readings on this move, it looks like it would be best to wait until tomorrow at least before entering any new short-term trade. There is usually a consolidation and weaker push to new highs after a really strong move like today.

    The 95.50 to 96.00 area on SPY looks like the first major resistance zone and would be an area at which I would likely recommend a new short-term trade. Now that price has broken above the recent highs, it seems almost certain this large upward pattern will peak very soon.

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