The decision whether to stay in the trade or take partial profits should have been easy, but it was excruciating. The last trade for our TLT Dec 160 Call was 4.11, and we originally paid 3.00 for it. That's a 1.11/3.00 = 37% gain.
TLT price action has 2 gaps on the way up that want to be filled in.
And TLT price is up against resistance from:
- 20sma
- 200sma
- Previous swing low at 160.64 on 8/28/20.
- ADX DI's were touching right before the close.
- We're close to the length of the previous up move, see the thick upward angled yellow line segments.
The often referenced voice in my head was screaming at me to take the 37% gain and deal with the rest of the trade tomorrow. But stochastics are not overbought and this seems like a fairly strong setup. We could gap up over all this resistance tomorrow. However, I do think the most likely move from here is to take a down leg to respect this resistance and fill in those 2 gaps, then reverse back up in the original direction of our trade.
This was a brutal mental tug of war. But many times I've traded these types of intermediate pull backs and most of the time it turns out I would have done better to just leave the trade alone unless it gives a sell signal.
So, after weighing things out, I decided to stay in the trade, which required much discipline and hand wringing. We'll have to wait and see how it turns out.
