Monday, June 8, 2009

Optional Protective Stop on SDS

In all probability anyone who took the SDS trade entry on Friday got in at a significantly better/lower price than the posted entry which is good. So if you got in around 53.00, then I would suggest getting a breakevenish stop (or a little better) in for today.

I will still post if/when a short-term oversold signal comes, but the rationale here is that if "the high" is not in for this advance yet, the market will likely find support soon, and could move explosively to a new high.

Looking at the S&P futures chart (symbol ES) for Friday, a classic long-legged doji formed. With the gap down this morning, this sets the potential for a longer term reversal based on that pattern. This makes me think that new highs are unlikely the next few days, if at all. But keeping losses to a minimum is the name of the game, and quickly reducing risk to nothing if possible can be a good pyschological tactic to allow you to stay with a good trade until the signal comes and avoid the risk of the trade going negative and stubbornly holding on to a loser if the market does not follow your expectations.


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