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.

TLT 6 Bullish Indications - Update 1

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.

TLT 6 Bullish Indications

Friday 10/23/2020 Larry Pesavento showed a Fibonacci based bullish Gartley pattern during his internet show on TFNN of TLT, which is the iShares 20+ Year Treasury Bond ETF. He's a famous, successful trader so I took a look at it and found a total of 6 independent bullish indicators:

• Bullish Gartley.
• Candlestick Piercing Pattern.
• Low stochastics.
• AB/CD.
• Filled Gap ()158.30-156.85).
• Yellow -27.2% (157.49), Green 78.6% (157.24) Fib confluence.

Set the target to 50% Fib retracement of the 172.25 - 156.75 range = 164.50, which coincides with a heavy congestion area lasting most of Sep.

It looks very promising as a high probability trade. I'm going to try and scale in if it moves in my favor. Meanwhile, on Friday 10/23/20 I started with a Dec 160 Call Option for $3.00. Remember options control 100 shares, so the cost was $300.