Trade Analysis – IWM April 19 $108 Puts

On April 14, IWM was trading within a consolidation range after another down leg the previous week. The morning saw a gap up of 0.85% and then quickly gave it all back within the first 30 minutes of trading. IWM would then bounce and set a new intraday high at $111.97. IWM then pulled back within the 9/20 EMA and found a consolidation range that would last almost two hours. In the 13:15ET bar, however, IWM seemed set to break down from this consolidation range with a lower low. A bounce back to within the now inverse 9/20 EMA along with a bearish MACD set up a great short entry point around the $111.30 area.

Unfortunately, nerves kept me from pulling the trigger. The low of $110.63 I felt was too close and not much of a risk/reward position. Even seeing this action, I regretted missing it. But I missed it.

IWM found a sustained downtrend with momentum. I missed two more pullbacks not able to get orders in fast enough from my phone before finally getting in on $108 puts for $0.33/each. Unfortunately, this came right before another consolidation pattern, though short-lived. On entry this was expected to be a day trade as I did not feel the daily consolidation was enough to break oversold conditions.

Thirty minutes after entry, IWM continued it’s downtrend and swiftly gaining momentum (notice the steep downswing on the MACD histogram on the 5-minute chart). When the low of $109.65 was put in I felt there was more downside remaining with another lower low on this pullback. However, IWM snapped back quick. Fifteen minutes into the bounce I was stopped out at $0.39 for 15% gains. These contracts peaked at $0.57. Definitely some lost cash.

To start, entry was horrible. Entry should have been taken at the 12:55ET position when IWM pulled back to $111.30 area. This was within a sustained down move on the daily and hourly chart and presented a great RR position with a stop at least at the previous high of $111.64. Contracts could have been taken at $0.25 This would be the lowest contract price during this intraday pullback. With the same stop I could have locked in an extra $0.08/contract increasing our gains to 20%. It is what it is…

The exit was perfectly acceptable. It would have been different on the better entry point as once I crossed the $0.50 mark I could have sold have the position for a free trade. This would have given us more flexibility on any rally’s. As it stood however, I just got stopped out. Part of the game. Learn and move on.

The toughest battle is getting in. Within that you have to have courage to stick to your convictions and rules and trust they will protect you. Reluctance to pull the trigger on the entry makes this a bad trade.

Trade Analysis - IWM - 1D Candles - April 14, 2014

Trade Analysis – IWM – 1D Candles – April 14, 2014

Trade Analysis - IWM - 60m Candles - April 14, 2014

Trade Analysis – IWM – 60m Candles – April 14, 2014

Trade Analysis - IWM - 5m Candles - April 14, 2014

Trade Analysis – IWM – 5m Candles – April 14, 2014

Market Analysis – April 16, 2014

The S&P 500 Large Cap Index (SPX), NASDAQ Composite (COMPQ) and Russell 2000 (RUT) made small gains again continuing the bounce versus recent lows. However, today was largely consolidation day (or indecision day) as most indices were well within the ranges set by previous days. This was a boring day for day traders. Nothing has been resolved.

ES Futures are maintaining hourly alignment established midday yesterday though there was a healthy pullback in the early trading session today. We are seeing negativity in the hourly MACD that makes me want to be careful getting too optimistic here. The last time MACD saw these heights we saw a 3.5% drop. This resistance level that currently sits under $1868 will be one to watch so I would suspect at least some consolidation or a retreat on first test.

ES S&P 500 Index Futures, April 14, 2016

ES S&P 500 Index Futures, April 14, 2016

On the daily, however, we remain in a bearish pattern though this is quickly turning bullish. We have taken out the two week downtrend line which bodes positive but only if $1868 caves. At that time we can take a look at a retest of recent highs near $1892.50. First things first.

ES is looking at a bullish turnover on the MACD and it’s looking like we may get this tomorrow. This would bode well for that first test of $1868 but again, expect at least a temporary wall. If ES can close over this level by EOD tomorrow then next week will set up to be a highly interesting week on the bullish side.

ES Index Futures Daily - April 16, 2014

ES Index Futures Daily – April 16, 2014

SPX daily is beginning to show some bullish turnover as well breaking the two week downtrend and seeing some rollover on the MACD. Here the $1872/$1873 level will be the one to watch and, as ES, a close over this will bode well for bulls after the Easter holiday. On the 60m chart (not shown) SPX may see a gap down and fill or positive open and backtrace. Some buying tension will need to be released despite today’s rather narrow trading range. Momentum is waning. Personally, I’d like to see a gap down fill and run to set up that $1872 test. A gap-up will likely sell off quick. $1858 will be key support if this trend is to  turn bullish.

S&P 500 Large Cap Index - April 16, 2014

S&P 500 Large Cap Index – April 16, 2014

COMPQ has taken a beating worse than a red-headed step child and it remains to be seen if we’re done here. But conditions are turning at least somewhat. Look for COMPQ to regain $4100 to gain more momentum. This should break the immediate downtrend and set up a test of the secondary trend near $4200 next week.

The concern is that this trendline break didn’t happen today. COMPQ saw some gains but nothing of strength versus the overall market which I’m cautious to cheer. COMPQ is riding weekly highs which can’t be taken for granted. But $4100 needs to be recovered. The longer the delay there, the more anxious this index should become.

NASDAQ Composite, April 16, 2014

NASDAQ Composite, April 16, 2014

RUT is also slow in gaining bullish momentum as, despite today’s gains, remains slow to break the most immediate downtrend. As with COMPQ, RUT is riding weekly highs and this favors bulls. But key levels must be regained, the first of which is last week’s low between $1130 and $1132. The close at $1131 looks promising. RUT does have room to run before any pullback would be needed. So this does favor some type of bullish open tomorrow morning. If RUT can’t break through $1132 look for a potential retest near $1121 which would fill this last night’s gap. On the upside, $1146 follows $1132 which would clearly shift momentum into the bull’s favor.

Russell 2000 Small Cap Index, April 16, 2014

Russell 2000 Small Cap Index, April 16, 2014

Disclaimer: I am short IWM $113.50/$114 put spread with an expiry of April 17, 2014.