XLE Looks Positive - Update 4

XLE Daily

Yesterday I said "If we close above the 8ema tomorrow, then it will look even more like a bobble between MA's." Well, we closed today above 8ema, and about half way up yesterday's candle. So now I expect we'll bobble between the 50sma, which is coincident with the downward Trend Line, and the 8ema, until we break out one way or the other.

If you look at this chart from the swing low at 68.66 forward, then you'll see the downward trending channel we're in, combined with the upward trending channel that precedes it, form a Flag pattern. The expected breakout from the downward channel is to the upside, which would continue the general uptrend you'd see on a higher Time Frame.

The fact that we bounced off the .382 Fibonacci also suggests we're going higher. But trading is a probabilistic enterprise, not a deterministic one, so we'll read the tea leaves the best we can, and remember risk control and capital preservation are the top priorities.

XLE Looks Positive - Update 3

XLE Daily

Today's chart looks worse than it probably is. It did form a red candle with no top wick. But we didn't close below the 8ema.

Yesterday I said "we're right up against the 50sma which could provide resistance, and put us in a bobble between the 8ema and the 50sma". So far, it looks like that's what's happening. If we close above the 8ema tomorrow, then it will look even more like a bobble between MA's.

Certainly there's not enough evidence to exit the trade. Not yet anyway. So we held the position. 

If we close below the 8ema tomorrow, and near the bottom of the day's range, then we'll have to think seriously about getting out. But we may want to wait and see if there's follow through the next day. It'll depend on the actual situation near the Close. For example, if the options have very little value left in them, then it may make more sense to hold on to them for a possible bounce.

XLE Looks Positive - Update 2

XLE Daily

Good news is we may have broke out of the congestion and made a higher high and a higher low than the candles since the recent swing low. We're above all the Moving Averages except for the 50sma. Stochastics are not yet overbought. We're continuing to move away from the .382 rather than retest it again. This is all Bullish and supports our trade.

But on the other hand, we're right up against the 50sma which could provide resistance, and put us in a bobble between the 8ema and the 50sma. We haven't yet broken the downward Trend Line. We haven't formed a Bullish candlestick pattern since the recent swing lows, although we may have formed a Double Bottom. Volume is mediocre. This does not paint a particularly Bullish picture.

Bottom line, its an easy decision to hold the trade.

XLE Looks Positive - Update 1

XLE Daily Chart

Today was a big day for many of the markets, but just noise within the current sideways congestion/consolidation for XLE. We even closed right in the middle of it. A non-material day.

Tomorrow is the trading day before Christmas. I'm told that is an up day about 75% of the time. I'm expecting a reversal in XLE, but not much of a break out from the congestion range.

XLE Looks Positive

XLE Daily

The applicable part of this Daily chart, regarding this trade, begins at the 65.48 low on 7/14/22. If you draw Fibonacci levels from the recent 94.71 swing high on 11/14/22 down to the 65.48 low on 7/14/22, you'll see the current swing low at 82.65 on 12/9/22 is very close to the 38.2% Fib retracement.

Notice the price action from 94.71 to 82.65 is in a AB/CD format. See the 2 little white, downward angled, diagonal lines. And, the 82.88 swing low 2 days ago made a higher low than the 82.65 low.

Also, Stochastics, on the bottom of the chart, are extremely low at the 82.65 low.

A setup like this can lead to a substantial bounce up to the -27.2% Fib extension at 102.64. It would have been better for me to wait until the Close today to see if we close over the 8ema. Its mid-day and we are over the 8ema but I should wait a few more hours. But I'm going to be busy with other trades I have planned near the close, so I'm going to jump the gun, but use options to limit my risk to a defined amount, which is the cost of the options.

So, I got an XLE March 95 Call for 2.22. I picked March to allow enough time for the trade but also to control the Theta time decay. Also, this option has a 30% Delta, which is an inflection point in the Delta vs underlying curve, meaning Delta accelerates its increase from 30% to 70%.

The Target is the -27.2% Fib extension at 102.64. This also coincides with the price swing from 7/14/22 to 8/29/22, as represented by the thick, white, upward angled, line. The next price swing is longer, which doesn't hurt. 

I almost always shade my entries, stops, and targets to account for slippage and bid/ask spreads. So, my actual exit is when XLE is 102.50.

Bullish Jan 2023 Beans - Exit

Jan Soybeans Daily at 13:30 ET

Jan Soybeans 5 minute at 13:30 ET

We have a big grains related report due out this Friday 12/9/22, which means its more likely we'll continue in a sideways consolidation until the report than have a consolidation break out. We're at the 78.6% Fibonacci level as well as previous resistance.

Considering price was over the upper Bollinger Band after a good acceleration on the Daily chart, the 5 minute chart is starting to roll over, and we had a 24% gain in our position, I decided it would be best if I sell now (13:30 ET).

I sent a Tweet at 13:41 ET announcing I sold, which gave anyone following me 40 minutes to take action if they wanted to.

Summary: I exited today even though we haven't reached our target because I think we'll go down to sideways until the report on Friday, with no clue what will happen in response to the report.

Bought: Jan 1450/1460 Call Spread for 5 1/8 on 11/29/22 (5.125 * $50 = $256.25)

Sold today 13:30 ET for 6 3/8

Profit 6 3/8 - 5 1/8 = 1.25 * $50 = $62.50 (62.50/256.25 = 24% gain) 

Bullish Jan 2023 Beans - Update 5

Jan Soybean Daily

Our patience paid off. At least for today. We made a large green candle on respectable volume, but saw some profit taking later in the day. And we made this Bullish move when many markets were red.

We closed above the 8ema and all the Moving Averages we track. Stochastics are still in the mid-range, so no "resistance" from being overbought. 

I was tempted to close out our position with a little profit because there is a big market moving Ag report coming out this Friday 12/9/22 12pm ET. But now the chart is looking Bullish again so it seems premature to exit today when we still have a couple more days.

So, I held our position yet again.

Bullish Jan 2023 Beans - Update 4

Jan Soybeans Daily

Jan Soybeans 5min

As you can see on the 5 minute chart above, we drifted upward overnight until the US Service PMI Report was released at 10am ET. The numbers were hotter than expected, which the market interpreted as more Quantitative Tightening by the Federal Reserve, which tanked almost every market, including Soybeans.

However, at the end of the day, the 5 minute chart shows we formed a double bottom and tried to climb higher into the Close. But the Daily chart above shows we bounced off the 200dma and closed under the 8ema, with Stochastics in the mid-range. It looks like we may just go sideways until this Friday 12/9/22 when there's a big Agricultural report at 12:00pm ET.

Unfortunately, sideways price action actually seems the most likely, given the circumstances. If we accept that, then the question is do we sell and limit our losses, or thanks to our fixed maximum loss due to using an option spread, hold our position through the report?

Let's review our Risk:Reward. Even though the Soybean market is moving its price action dynamically, our Target hasn't changed, so the R:R hasn't changed. Maximum risk is what we paid for the option spread, which is 5 1/8. 

And the maximum gain is the width of the option spread, minus the remaining extrinsic value when we hit the Target. The width is 1460 - 1450 = 10. If we get a huge bullish response from the Report, then we can say the spread should be worth close to the width. If we trim off half a point, maybe we're close to a maximum value. So, 10 - 1/2 = 9 1/2. As you can probably tell, I'm kind of fudging here. I could go through a more complicated and time consuming estimate, but I'd still have to guess the response to the Ag Report, so I think it would be a waste of time to do the more in-depth analysis.

So, say a best case for a bullish report and selling at our soybean price Target rather than holding 

the position longer, our Risk is 5 1/8 points and the Reward is 9 1/2 points. 

If we were to sell at the end of the day today, we'd have taken a loss of 1 point. 

Bottom line, I decided its worth waiting to see what tomorrow's price action looks like.

Bullish Jan 2023 Beans - Update 3

Jan Soybeans Daily

Today's candle combined with yesterday's form a Bullish signal called a Bullish Harami. But to be a confirmed signal needs to close over the 8ema, which it didn't.

If you consider the down angled congestion as a Flag Pattern then we have come back down and bounced off it. This is a very Bullish pattern if it follows through.

So, based on these promising, albeit premature, indications, and the fixed risk, thanks to our Vertical Option Spread, led me to leave the position on over the weekend.

Bullish Jan 2023 Beans - Update 2

Jan Soybeans Daily

Looks bad for our long position, but things are not always as they seem. Today's candle, along with the previous 1 or 2 candles, does not make a candlestick sell pattern.

We've had several similar configurations recently, where it looked like we were about to flush to the downside, but then we bounced back upward. Unfortunately, we had more volume today than we did recently, which suggests it might be different this time.

I had said yesterday I was concerned about the overbought Stochastics. Maybe that plus the fact we're in a consolidation, caused a temporary down leg or two. Notice we didn't close below a down sloped trend line. This might just be a retest to be followed by a resumption of the upward price action.

Fortunately, our risk is fixed by the option Call Spread. So, given all this, I decided to hold the position and give the market an opportunity to reverse back into our favor.

Bullish Jan 2023 Beans - Update 1

Jan Soybeans Daily (yellow annotations)

We had a very nice Bullish day. Got a higher high and higher low. Formed something close to a Doji Sandwich candlestick pattern, which is Bullish. Closed very close but slightly higher (1649 1/2) than the previous swing high (1469). We had strong volume, and higher volume than yesterday. BB/KC continues towards a break out.

Only thing that gives me pause is that Stochastics are overbought (>80).

We definitely want to stay in this trade.

Bullish Jan 2023 Beans

Jan 2023 Soybeans Daily Chart

Went long January Soybeans with a Jan 1450/1460 Call Spread for 5 1/8. Multiplier is $50/pt, so cost was 5 1/8 * $50/pt = $256.25. Today's bean close was 1459 1/2, which means our Call spread is very close to 100% intrinsic value. If the futures price stays over 1460, we'll see the valuation of the option spread widen out from 5 1/8 to 10, which would double our investment. It'll widen out because the time value of the long option will wane as we get closer to expiration on 12/23/2022.

See the yellow annotations on the chart above.

Went long because I see:

• Flag pattern break out.
• Scoop pattern about to break out.
• Bollinger Band/Keltner Channel squeeze about to break out.
• Left/Right Combo candlestick pattern.
• Close above the 8ema, with continuation today.
• High up volume.
• Above all Moving Averages.
• No Grain Reports for at least 1 week.

Soon as the order was filled, which was 14:18 ET, 2 minutes before the grain futures market closed, I entered a sell order for 9 3/4.

The expected bullish move of the Jan Soybean futures price is the D point of the AB=CD pattern (see thick yellow angled lines). D can be calculated from 1406.75 + (1469 - 1366.75) = 1509. This is very close to, but just shy of, the previous swing high of 1512.25.

Summary:

Entry: 1459.

Target: 1509.

Stop: not necessary because our risk is fixed and affordable, thanks to the option spread.

Risk: 256.25

Reward: (9 3/4 - 5 1/8) * 50 = 231.25

R:R = 1:1 which doesn't sound great but expect this a high probability setup.

Amazon Bullish Kicker - Exit

AMZN 1 day 14:15 ET

AMZN 3 min 14:15 ET

While I still think we'll get up to at least 109 (top of the gap), I got out today when AMZN was 100.60 (see my 2:19pm ET Tweet) because there is possibly significant resistance at about 100.25 - 100.50 due to:

• Previous double bottom lows at 101.26 and 101.43
• 20 ema
• 100 price round number

Also, its Friday and there are many possible headline risks over the weekend. I think its better to exit with a profit and look to re-enter on a dip.

On the other hand, its possible AMZN will gap up on Monday and run up to the Target, giving no good entry point. If so, then we missed it. So what, there will be plenty of trade opportunities next week. Its better to protect your capital and take a profit, than take a significant risk of a loss when you clearly see possible resistance. Holding over the weekend is very different than monitoring a trade in real time.

Besides, I'd rather be out wishing I was in than be in and wishing I was out.

Result for now:

AMZN Nov 100/105 Call Vertical Bought 1.18, Sold 1.90

190 - 118 = $72 profit per contract

(190-118)/118=61% gain

Amazon Bullish Kicker

 

I should wait until the end of the day to enter this trade, but the market momentum for today is very strong. So it seems very unlikely the technical setup will not be in pace at the Close. The market gapped up today on the CPI inflation report that indicates inflation is easing. I think this sentiment is premature, but I think it'll last long enough to hit our Target.

AMZN is showing the following on the Daily chart above:

• Kicker candlestick pattern
• Bounce off the 127.2% Fibonacci level
• Low stochastics
• Likely Close above the 8ema

The Target is the top of the 109.77 - 104.87 gap. Bought AMZN Nov 100/105 Call Vertical option spread for 1.18 at 12pm ET today. The close proximity of the 11/18/22 expiration date will help with the "fuller" valuation of the spread than a later dated expiration. The spread will help mitigate the high Theta time decay.

Energy May Be Turning On - Exit

XLE 3 minute

We had a little gap up at the Open followed by a retracement to fill the gap. This is the same behavior as yesterday, when I described it as a possible "Exhaustion Gap". 

Given 2 days of this price action, and the Federal Reserve FOMC rate decision announcement later today at 14:00 ET, it seemed like a good idea to exit with what profits we had left, and wait out the announcement.

Sold the XLE Sep 75 Call for 3.54 at 10:30am ET. Profit is (3.54 - 3.05) * 100 = +$49. per option.

49/305 = 16% gain. Not bad for 9 calendar days. If you annualized it, it would be 16 * 365/9 = 649% annual return.

Energy May Be Turning On - Update 4

XLE Daily

Today's price action is both good and bad. 

Its good because we gapped up at the open. We made a higher high and a higher low. We closed above the 8ema, and also the 3ema.

Its bad because we gapped up on high Stochastics. This could be interpreted as an "Exhaustion Gap".  Exhaustion Gaps can indicate an end to the current trend, which would mean price starts heading down from here. We also came close to forming a Dark Cloud Cover candlestick pattern. Such a pattern can also indicate an end to the current trend.

A Dark Cloud Cover needs to close below the 50% midpoint of the previous candle. The endpoints of the previous day's candle body are 72.13 - 73.76. The midpoint is (72.13 + 73.76)/2 = 72.95. The endpoints of the previous day's full candle are 71.27 - 73.83. The midpoint is (71.27 + 73.83)/2 = 72.55. Today's close was 73.09, so technically we did not form a Dark Cloud Cover candlestick pattern. 

If you look at the red candle from 7/22/22 and the green candle before it, you'll see a valid Dark Cloud Cover candlestick pattern. However, even though that was on high Stochastics, we continued upward this week. Another example of the same thing are the candles from 5/31/22 and 5/27/22. You can see them on the chart above.

After considering what was on the chart at the end of the day today, I decided to hold the position.

Energy May Be Turning On - Update 3

XLE Daily

We recovered well from the little dip. Today and the previous candle both made higher highs and higher lows. We haven't closed below the 8ema since we entered the trade. And we have a relatively clear path to the 50sma Target.

Short term Stochastics are high, but if you look back to May 17th through June 10th, you'll see Stochastics pinned near the top as price continued higher. So, this can happen again.

We may encounter some resistance at the previous swing high around 77 on June 29th. But the 50sma (our Target) is gently sloping down. So it may be close to the 77 level anyway.

We made a nice green candle today and the trade is on.

Energy May Be Turning On - Update 2

XLE Daily

We were doing so well, but today we took a dip. We created a lower high and lower low for the day, which is not what we want to see. Also, Stochastics are knocking on the door of the oversold level.

However, we managed to crawl back and close above the 8ema and the 20sma. So, I think we're still good. At least to hold overnight tonight.

The 50sma Target closed at 78.66, so we left our 78.50 Target unchanged.

Energy May Be Turning On - Update 1

XLE Daily

Today's price action was an excellent confirmation we're on the right track. Look at today's candle. The Open was 70.06 and the 70.04 low was immediate and negligible. The Close was 72.32 and the high was 72.50. Very close to the Close. This shows XLE was on a mission to climb today.

We opened right on the 8ema, penetrated the 20sma, and closed well above it. Combined with yesterday's Doji candle, we formed a Left/Right Combo candlestick pattern, which is Bullish.

Also, the ADX did a Bullish cross. Plenty of room before Stochastics become overbought.

The 50sma closed at 78.95, so didn't need to change our 78.50 target.

Bottom line, we had a very Bullish day. Our September 75 Call increased from 3.05 to 3.60. That's a .55/3.05 = 18% increase. Looking good!

Energy May Be Turning On

XLE Daily

XLE looked bullish enough this morning to go long. Got a XLE Sep 75 Call for 3.05.

Here's what I see:

• Bounce off the 61.8% Fibonacci level
• Bounce off Support/Resistance level around 65.50
• Positive Stochastics Divergence
• Bounce off 200sma
• Trend Line Breakout
• Close over the 8ema

Set the Target to the 50sma at about 78.50. This will need adjustment as the 50sma is slowly descending.

Set the Stop to just under the 65.48 swing low at 65.36.

I'll look at the risk/reward in terms of the stock rather than the complicated theoretical estimate of the option:

Risk: 70.36 - 65.36 = 5.00

Reward: 78.50 - 70.36 = 8.14

R:R = 8.14/5 = 1.628:1 Not very good but its a rough estimate and fixed maximum loss.

JNJ No Tears Gartley Pattern - Exit

JNJ Daily at 9:46am ET

We opened gap up, then started to fill in the gap, but reversed back upward before even filling half the gap. This is quite Bullish, but there's a scheduled testimony by Federal Reserve Chairman Powell at 10:00am ET. That, plus the fact we're struggling a bit at the 50sma, led me to sell our position at 178.22, which is very close to the 179 Target.

At 9:47am ET I Tweeted:

"Sold the GARTLEY pattern near the 179 Target on JNJ. Want to be out before 10am ET Powell testimony."

The .618AD Target at 179.27 was subsequently hit 14:23 ET.

This has been a beautiful textbook trade. Everything worked as it should with very little heat or gray areas.

Summary:

Bought JNJ Aug 175 Call for 3.52 6/14/22

Sold for 7.95 6/23/22

795 - 352 = $443 profit.

795/352 = 226% increase.

443/352 = 126% return.

JNJ No Tears Gartley Pattern - Update 1

JNJ Daily

Great day for our JNJ trade. Got a big candle on big volume with a Close above the 20sma. We bounced off the 50sma, which is a concern, but we've breached it many times before.

We made a higher high and a higher low. The ADX made a bullish cross. Stochastics are still in the mid-range, so no selling pressure from that.

We hit the .5AD level, which is constructive, and we closed in the upper half of today's candle.

The Aug 175 Call option, for which we paid 3.52, had a high today of 7.60. That's better than a double. The voice in my head was quite disappointed when I didn't succumb and sell the option to capture the profits. Especially since I've had trades where I exercised discipline and held out for the target, but the chart reversed the next day and I ended up with much less profit, or worse.

But it looks like we only need one more green candle and we'll hit our 179 target. Plus everything looks bullish for this trade. 

So, bottom line, I held the line and held our position for another 3 points. Looking at the option chain, it looks like between today's stock close 175.74 and our Target 179, we'll get an average Delta of about 60. So, if we hit the Target, the additional profit would be approximately 3.25 * 60% * 100 = $195. 

Seems like holding the position is the smarter trade, albeit the more uncomfortable one.

JNJ No Tears Gartley Pattern

JNJ 6/21/22 Daily Chart

Went long with a JNJ Aug 175 Call on 6/14/2022 for $3.52. At the time, the stock was 168. I entered due to the confluence of the AB/CD, 200sma, and 61.8% Fibonacci retracement. But I got in early, without confirmation. We got that confirmation today, with a close above the 8ema.

Here's what I saw today:

• Bounced off 61.8% Fibonacci of the Gartley pattern
• Bounced off 200sma
• Bounced off AB=CD of the Gartley pattern
• Oversold Stochastics
• ADX Quit the Down Trend
• Trend Kicker candlestick signal
• Close over 8ema

Set the Stop to 167, just below the D point.

Set the Target to 179, just below the .618AD level of the Gartley pattern.

Maximum Risk is the full cost of the Call option, $352. But a better gauge for comparison to other trades is to use the stock value:

Risk = 168 - 167 = $1.

Reward = 179 - 168 = $11.

R:R = 11/1 = 11:1 which is ridiculously great. To be fair, the initial risk wasn't the current Stop. The initial Risk was 168 - 155 = 13, which would represent a bad R:R. 

Let's look at the R:R if I got the 175 Call option at the end of today, but based on stock price. Today's close for JNJ was 173.01:

Risk = 173 - 167 = 6

Reward = 179 - 173 = 6

R:R = 1:1 on this basis, which is considered too low. However, this trade is based on the Gartley pattern, which has a Win Rate of 75%. So, given the Win Rate, 1:1 is acceptable.

ZIM Zooming Down - Exit

ZIM 3min 13:30ET

Above is the 3 minute chart at 13:30 ET. You can see we had a gap up at the Open this morning. That led to a Kicker candlestick signal. These 2 indications are very Bullish. Then we drifted sideways.

Considering the Bullish candlestick signals, plus there is a major Federal Reserve announcement tomorrow 14:00 ET, and the remaining July 40 Put option was fully valued, I decided it would be a good idea to exit and reassess ZIM after the market reaction to the FOMC rate decision tomorrow. Sold the option at 13:23 ET for $1.05.

So, the bottom line on this trade:

Bought July 55 Put for $3.20, Sold for $5.90, Net +270

Bought June 60 Call for $0.60, Sold for $0.48, Net -12

Bought July 40 Put for $0.98, Sold for $1.05, Net +7

Total: $270-12+7=$265 profit.

ZIM Zooming Down - Update 3

ZIM Daily 6/13/2022

Today we opened gap down then retraced to fill in most of the gap. But today's price action was so bearish, we headed back down before we could fill the full gap.

We ended the day with a Doji candle but near the bottom of the range. Today's low was 47.68. The previous swing low (our B point in the AB=CD) was 48.21, which means we confirmed the AB=CD pattern by surpassing the B point. This is encouraging for our trade.

But, take a look at the Stochastics panel on the bottom of the chart. It is definitely oversold now (under 20). This is a concern as it provides a kind of pressure to reverse the price action. When Stochastics are oversold, I start looking for the next likely support level. I see it as the 61.8% Fibonacci level, which also coincides with a previous swing low on 10/6/21 at 42.14. The 61.8% Fib can be calculated as:

A-.618(A-X) = 91.23-.618(91.23-11.34) = 41.86

So, I changed the target for the new July 40 Put option to 42.50, which shades the previous swing low of 42.14 to account for slippage, Bid/Ask spread, and premature buying pressure.

Given the strong momentum of the current down leg, characterized by gaps and relatively long candles, I'd expect we'll ultimately get down near our original target at 29. However, it seems likely we'll get a bounce before then. I'd rather exit and re-enter later than ride out the bounce.

Also, there is a potentially big market moving event this Wed. 6/14/22 at 14:00 ET. The FOMC rate decision. It would be great to capture profits and be out of the market before then. That's a supporting reason to raise our target.

ZIM Zooming Down - Update 2

ZIM 6/10/22 Daily Chart

Yesterday's post included "it seems very likely we'll get a higher than expected inflation number. If we do, then that puts more pressure on the Federal Reserve to increase short term interest rates higher and faster. That should be very bearish for the market.". That's exactly what happened. I didn't watch our Put value continuously, but I did notice our profit got as high as $350. It may have been even higher.

Soon as the CPI Report came out at 8:30am ET this morning and the equity futures started tanking, I knew we didn't need our June 60 Call hedge anymore, but the option market didn't open until 9:30. So I entered a limit order to sell the option for at least $10. At 8:56am ET I sent this Tweet:

"CPI report was worse inflation than expected, as we predicted. ZIM should drop more. Entered order to sell the hedge for at least .10"

When the market opened at 9:30 our June 60 Call sold for .48, so we only lost .60 - .48 = .12 x 100 shares = -$12. Cheap insurance to protect our $590 position.

Near the Close, I had to make a decision. The voice in my head was insisting I sell and capture the profits while I can. I don't want to hold over the weekend and wake up Monday to a loss because ZIM announced they're being acquired (just made that up), or some other bullish news. What to do?

Today we formed a Doji candle below yesterday's low but near it. If, on Monday, we gap up a little at the Open and make a significant green candle, then we'd form a 3 candle pattern called a Morning Star. And since Stochastics are now oversold, this pattern would be very bullish. And volume has diminished. 

Also, we're sitting right on the 50% Fibonacci level. It would be normal for this level to provide support. However, if you look left, you'll see we already bounced off the 50% Fib on 4/25/22. Price could certainly bounce again, but often once you've paid your respects to a support level you don't need to pay tribute again.

All of the points above give credence to the greedy, paranoid voice in my head saying "sell, sell, sell!". However, this is still a bearish setup in a bear market. Chances are we will continue down on Monday. But maybe it would be a good idea to take something off the table. I thought about a good way to do that and came up with this: Roll down the option. Here's how I did that:

I sold our July 55 Put for 5.90. This captured 5.90 - 3.20 = 2.70 x 100 shares = $270 in profit.

Then I bought a July 40 Put for .98 x 100 shares = $98.00. If we lose that whole option, then we'll still have $270 - 98 = $172 in profits. So we "rolled down" the option strikes in our position from 55 to 40, and thereby captured some good profit but stayed short to benefit from any further drop in the ZIM stock price.

Our current balance is $270 - 12 = $258 in hard money profit. Plus we have a July 40 Put worth $98.

ZIM Zooming Down - Update 1

ZIM Daily

Today we gapped down at the Open and didn't even try to fill the gap. That's very bearish. Then we made another big down candle almost as big as yesterday and with almost as much volume. 

Given that this is the day before a big economic report, tomorrow morning 8:30am ET (the month to month CPI inflation report), makes today's big move even more significant, because you often see quiet and/or mean reversion type days before a big report comes out.

In yesterday's post, I forgot to mention the candle closed near the bottom. This was another bearish indicator. Today, we did it again.

Stochastics are still in the mid-range, so we have plenty of runway to drop further.

So, we continue to have a very bearish set up. However, the CPI report tomorrow morning is a craps shoot. The market could rocket upwards in response. And this could definitely happen even though we're in a bear market. On the other hand, looking at things fundamentally, which I try not to do, it seems very likely we'll get a higher than expected inflation number. If we do, then that puts more pressure on the Federal Reserve to increase short term interest rates higher and faster. That should be very bearish for the market.

Our July 55 Put was purchased yesterday for $3.20. Today's last trade was $5.90. That means our puts have increased in value by 5.90 - 3.20 = 2.70 * 100 shares = $270 profit. I had a very strong desire to sell and capture that profit. Would that be the best course of action? It would certainly be the safest and satisfy the loud voice in my head warning I could lose it all. But how would I feel if ZIM gaps way down tomorrow? Not so good.

I decided I wanted to participate in a likely downdraft tomorrow, which I'd miss if I sold out the position. However, there's a very real chance the market could shoot up tomorrow and take ZIM with it. So it would be a good idea to take a hedge against our short position.

I Tweeted out at 3:16pm ET that I bought a June 60 Call option for $0.60. If ZIM goes up significantly tomorrow then this Call option will increase in value, offsetting our losses in the Put option. Not necessarily 100%, but it'll help. Since the news comes out at 8:30 and the option market opens at 9:30, we'll just have to wait to liquidate the position.

Of course, if ZIM takes a flying leap further down, the Call option could become worthless before I can sell it. But our gains will far outweigh the $60 loss. Can't wait to see what happens tomorrow.

ZIM Zooming Down

ZIM Daily

Shorted stock ZIM this afternoon by buying a July 55 Put for $3.20. Quarterly Earnings is 8/17/22 before the market opens. I Tweeted this out at 15:39 ET.

Here's why I'm bearish:

• Kicker candlestick pattern
• Blue ice failure
• Negative Stochastics Divergence
• Close below 8ema,200sma
• High volume, Big bar
• AB/CD

A Kicker pattern is when you have 2 candles separated by a gap and facing different directions (Up and Down).

Blue Ice Failure I learned from Steven Bigalow in candlestickforum.com. Its when price comes up from below the 50sma, breaks through it but can't hold it, and falls back through the 50sma. Steve uses blue for his 50sma while I use red. That's why he calls it Blue Ice Failure.

To see the NSD, look at the downward angled thick, white, line segment in the Stochastics panel at the bottom of the chart. Then see the upward thick, white, line segment on the price chart directly above. Price was heading up while Stochastics was heading down in the same time period. That's Negative Stochastics Divergence and a bearish indication.

The AB/CD pattern has not been confirmed yet because it hasn't closed below the B point at 48.21. So I did get in early but I figured it was a reasonable decision thanks to all the other bearish indications. The measured move for where to expect price to go is the D point where AB=CD, which can be calculated by D=C-(A-B)=71.40-(91.23-48.21)=28.38.

The calculated D point coincides with the 78.6% retracement at A-.786XA=91.23-.786(91.23-11.34)=28.44. So this area makes a good target.

Also, if we get to the target, then we will have set up a Gartley pattern. So the Target is a great place to reverse our position.

Summary:

Entered 6/8/2022 15:13 ET, ZIM=58.91, Bought July 55 Put for $3.20

Target 29 (which is shaded a little to account for slippage, bid/ask spread, and an early completion)

Stop is just above the Kicker at ZIM=70

Using the stock to calculate the risk:reward ratio:

Risk = 58.91 - 70 = -11.09

Reward = 58.91 - 29 = 29.91

R:R = 29.91/11.09 = 2.70 which is great.

July Corn Possibly About To Pop - Exit

July Corn Daily

We broke out of the wedge to the downside and hit our Stop. Not much more to say. 

It looked very promising when we entered, but a significant percentage of trades don't work out. The best you can do is follow your process, that has a proven edge, and control your risk. You can't ensure a win when you enter a trade, but you can go a long way to control your risk.

Bottom Line:

Entered: 794 1/2

Exit: 781

Net: 781 - 794 1/2 = -13.5 * $10/pt = -$135.

Entered: 785

Exit:772 5/8

Net: 772 5/8 - 785 = -12.375 * $10/pt = -$123.75

Total loss: $135 + 123.75 = -$258.75

July Corn Possibly About To Pop - Update 7

July Corn Daily

We're still in the Gap, above the 38.2% Fibonacci level, and made a nice green candlestick, closing near the highs. This is somewhat bullish. 

However, we didn't close above the 8ema. In fact, we barely pierced it at all. This isn't very bullish. But we survived the weekend, and the trade still looks viable. 

Its reasonable to interpret this chart to imply we came down to this area to fill in the Gap. We did that. Now we're setting up to resume our upward trajectory.

This trade is going to continue to feel unconvincing until we close above the previous swing high, which was 810 1/4. If you look at the sequential swing highs and lows, you'll see we're forming a sideways wedge (or triangle). See the thin, white, angled lines.

July Corn Possibly About To Pop - Update 6

Sent this Tweet 9:34am ET

Sent this Tweet 14:10 ET

July Corn 15 min Close

Leading up to the Corn market open (9:30am ET), and after, the price action was bouncing between the bottom of the Gap and the 38.2% Fibonacci retracement level from the Daily chart. Its Bullish that we're getting strong support, but on the other hand, we don't have enough strength to break out up through the Gap. So its hard to have any conviction which way we break out of this range.

You can see above where I sent out a Tweet just after the Open that we raised the Stop to just under the swing low at the Gap bottom. That held all day. Nearing the end of the day, and the week, I wanted to exit if we saw any weakness. If we didn't see weakness then I want to stay in the trade over the weekend, thinking we'll continue the previous uptrend.

So, I used the existing Stop as a determinant of weakness. The Stop wasn't hit, so we're still long this trade. 

July Corn Possibly About To Pop - Update 5

July Corn Daily

Not much to say other than we seem to be getting support from the 38.2% Finonacci level as well as the bottom of the gap. Technically, I should have exited the position today because:

• We made a lower low and lower high today
• We closed below the 8ema
• We made a Doji candle, which is indecisive
• We made a lower swing high 3 trading days ago

But sometimes its ok to use some human judgement. I think its very likely we came down to fill in the gap, and now we can bottom out and start back up.

So, I want to rely on our Stop and give the trade some slack. If this was a mistake, and I should have gotten out today, then price will continue further down tomorrow and likely hit our Stop. My expectation is we head back up tomorrow.

July Corn Possibly About To Pop - Update 4

We got a gap fill exactly as I've been talking about. In fact it was even better than I planned for because it filled the whole gap. I entered the limit order 2 points shy of the full gap because gaps sometimes "mostly" fill rather than completely fill.

I sent these Tweets this morning as it was happening.

9:52am ET

9:59am

10:10am

By the end of the day, the 5 minute chart looked like this:

July Corn 5 min

Notice how we hugged the bottom of the gap all day once we reached it, even though the world was selling off around us today. Also notice the big bullish volume bar at the very end of the day and we closed above the 8ema, 20sma, and 50sma. There is also a possible Bollinger Band/Keltner Channel breakout pending. These suggest we'll drift upward from here. And like Louise Yamada says "The longer the base, the higher in space".

So, bottom line, we're back in this long trade:

Entered: 785

Stop: 768

Target: 860

July Corn Possibly About To Pop - Update 3

July Corn Daily

Haven't given up yet. The candles for today and yesterday form an encouraging candlestick pattern called a Bearish Harami. I say encouraging because I want to get back down to fill the gap and catch our limit buy order waiting at 785. Then we can head back up and go for the ride.

Tomorrow's candle could be important, if we don't just drift sideways. If we get a bullish candle tomorrow, I'll probably give up on this trade.

July Corn Possibly About To Pop - Update 2

July Corn Daily

July Corn 15 minute

July Corn futures came down to 792 3/4 after the gap up before heading back up, just missing our 792 limit order to get back in Long after the weekend. It drifted upward from there.

Now expecting a retrace down to 783 to fill the gap and bounce off support. See 15 minute chart (bottom chart above).

Changed our limit buy order to 785. Stop (768) and Target (860) are the same. If we get too close to the Target, I'll have to cancel the buy order.

So, in trying to protect against a big loss from a gap down, we missed the whole trade due to a gap up. No joy in Cornville.

July Corn Possibly About To Pop - Update 1

July Corn Daily

I don't believe this red candle represents a change in trend, however I sold our long position anyway. Why?Because it might be and today is Friday, which means 2 days of uncontrolled price action.

We didn't get a candlestick sell signal but we did get a lower high and a lower low, and a close below the 8ema (orange line). I really didn't like selling but a strategic retreat made more sense than taking an unhedged risk over the weekend in a crazy financial environment.

So, this is a risk management move more than an exit from the trade. That's why the title of this post says "Update" rather than "Exit". I intend to see how we open on Sunday night and maybe into Monday. If conditions warrant, I'll get back in long.

The loss from today's sale is:

781 - 794 1/2 = -13.5 * $10/pt = -$135.

July Corn Possibly About To Pop

July Corn Daily

July Wheat Daily

Today, 5/12/2022 at 12:00 pm ET, several grain related reports were released by the USDA. Wheat rocketed up, and this is the grain I wanted to buy, but the risk is too high for a pullback to the support level it broke through. So, I may get some wheat if it pulls back then bounces back up.

The corn market had a much more subdued reaction, yet still bullish. You can see yesterday and the day before formed a Doji Gap Up candlestick pattern, after bouncing off the 38.2% Fibonacci retracement level.You can also see Stochastics were oversold at the swing bottom. Finally, we closed over the 8ema and every other MA on my chart, on high volume.

I don't go out of my way to follow fundamentals, but the price of everything is going up in our high inflationary environment, which especially includes food and energy. Corn is used for both. This is generally bullish for corn. Then you have decreased grain exports from major supplier countries and bottlenecks in the supply chain. Also bullish for corn.

Also, the US Dollar has been screaming higher due to a flight to safety to the USD. A strong dollar should diminish prices, but corn rose today as the dollar ETF UUP made a new 2 year high.

So, based on all this bullishness, very near the market close at 14:20 ET, we bought a YC July futures contract for 794 1/2. I managed to get a Tweet out at 14:14 ET. Set a Stop at 768, just below the recent swing low, and a Target at 860, shading the 127.2% Fibonacci extension of 860.382 by just a little. We're using the YC mini-contract ($10/pt) rather than the full sized contract ($50/pt) to contain risk.

Summary:

Entry 794 1/2

Stop 768

Target 860

Risk 794 1/2 - 768 = 26 1/2 points

Reward 860 - 794 1/2 = 65 1/2 points

R:R = 65.5/26.5 = 2.5:1 which is great.