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.