If yesterday's decision to stay in our short position was difficult, today's was severe. The top chart is a daily chart and below it is a 4 hour chart.
The Daily chart shows we went significantly above the 8ema and uncomfortably close to our Stop at 33.50. The worst thing is we closed much closer to the high than than the low. Combined with the previous 2 days' candles, it looks like a Bullish Engulfing pattern followed by a close above the 8ema. That is enough to close out the position.
However, we have not yet made a new swing high, and the bigger picture is we broke out of a Bearish Flag pattern and hardly went down at all. Also, notice we only made it down to the 38.2% Fib retracement of the green range. I've seen many times where a chart will bounce off the 38.2 Fib but then roll over and continue down to the 50% Fib of the same range. And that is where our target is.
Looking at the 4 hour chart, you'll see we're up against the 200sma on high Stochastics. If we roll over from here we'll make a new swing low on the 4 hour chart. That's a bearish indication.
This is a very difficult decision. Technically my rules say to exit and prevent further loss. But in this situation we're so close to the Stop that it won't be much of a financial difference whether we exit here or the Stop. So I decided the incremental loss of remaining in the position vs exiting now is worth waiting to see if the price action reverses when the market re-opens at 20:00 ET tonight, and avoid the loss altogether.
Well, the USA has rules (laws) written by the legislative branch but it was necessary to create the judicial branch to use judgement in applying those rules. So it makes sense there will be cases where it makes sense to bend my trading rules. (Wow, how's that for a rationalization not to suffer a loss lol).
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