As you can see in the VXX chart above, the Morning Star candle pattern didn't form. The 12/8/16 candle fell back and closed as a Doji. Then 12/9/16 gapped up at the open but also fell back and closed below the 12/8 low but above the 12/7 low.
One lesson here is to not rely on how a candle will close based on its action while still forming.
If this was a scalp trade I'd be out because the actual behavior didn't match the expected behavior. However, this is a swing trade with a controlled maximum risk, and there is an FOMC rate decision on 12/14/16. I've heard on financial news the futures market assigns a 100% chance the Fed will raise rates. I still need to learn how that calculation is done, but I've heard enough different sources that I believe it. 100% sounds extreme. VIX and VXX are both still off their recent lows. The VIX is still very low and resting on the lower Bollinger Band. The VIX daily chart is in a BB/KC squeeze (see VIX chart below) (BB/KC squeeze is when the Bollinger Bands[20,2,ema] come inside the Keltner Channel[20,1.5]). A break out from a squeeze can yield a sizable move.
So, I'm going to hold on to the position and see what the reaction is to the FOMC decision on 12/14/16. And if its a fizzle, then the end of the Santa Clause Rally is within the life of the option spread, so I'll probably hold on for that as well. I made sure the position is not greater than 2% of my account, so I can lose the full position and not threaten my account.
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