Art of Trading: A Trading Week In Review
Updated: Jan 30, 2022
We were given another volatile trend down week in the market! This was a short week as Monday was a holiday. What was interesting about this week’s market action in $QQQ was each day the index attempted to go green but quickly lost it intra-day and continued the trend lower! After all of this, $QQQ is now down -11.5% YTD!
The Art of Trading short term portfolio (which we have been reviewing at the end of each week) Is now +5.75% YTD! We will take a look at our $SOXS, $SQQQ, $ERY and $BZ trades we placed this week!
The "SHORT TERM TRADES" portfolio is basically this:
The trade alerts will be labeled "SHORT TERM TRADES". These will be trades that last a few days in duration, and we will be booking profits and losses much more actively. Holding no more than 4 active positions at a time. We will look to capitalize on long positions and potential short positions when the occasions are right.
Now onto the trade reviews!
$SOXS Trade Review – Long Side Trade
From 1/13/22 into 1/18/22 – Position Closed
I had a few questions about this trade, so I think this is a good time to explain what $SOXS is, and how it works! $SOXS is an inversed leveraged ETF. This particular trading tool follows the semi conductor space in an inverse manner! (Intel, Broadcom, Nvidia, Texas Instruments, Qualcomm, Analog Devices, Marvell, KLA corp, Micron, Microchip tech). Basically, if the semi-conductor market goes DOWN 1% in a day this ETF will go UP 3%. So, although we went “Long”, $SOXS will do what a short position would do but on the long side!
Here is some more information on it here - $SOXS
We went long $SOXS about an hour before Thursdays close, trying to catch the downside momentum of the market into the close that day!
The idea behind this trade was the topping pattern and distribution volume patterns pilling up in $SMH!
I’ve annotated a chart showing what I was seeing in detail!
$SMH loses major daily support at the $290 level and then goes on to waterfall lower. Each day piles on more and more volume (Much higher than average!) This is classic distribution volume pattern characteristics!
So, besides the technicals present in the $SMH chart what made $SOXS a good setup when we took that trade? If you pair the idea behind the overbought RSI levels the triple topping pattern and the distribution volume characteristics in $SMH you will see the opposite characteristics in $SOXS (Making it a long setup) Remember $SOXS is an inverse ETF. When semis fall $SOXS does the opposite in a 3x leveraged manner and goes up!
One key characteristic in $SOXS was this An Inverse Head and Shoulders Pattern:
See how this technical pattern setup, in $SOXS?
I’ve annotated the $SOXS chart depicting this setup:
Unfortunately, we closed the position a little prematurely but still banked a decent 2.75% gain. The previous trading week 2022-01-10 through 2022-01-14 rewarded those who were quick to the trigger. Last week sellers dominated and short side trades broke out on multiple downside continuation days.
The Short Term Trading portfolio is focused on booking gains. Sometimes we will close out trades a little early and sometimes a little late with this aggressive approach. The important part is we try our best to capture the gains when we have them!
$SQQQ Trade Review – Long Side Trade
From 1/20/22 into 1/21/22 – Position Closed
We went long $SQQQ on January 20th around 1:50 PM EST. Why did we choose to go long $SQQQ near the end of the day Thursday? We picked this spot because first the market had rolled over into the close each day last week. More importantly the timing was right around the time when you generally see market algorithms light up! 11AM EST and 2PM EST. I figured if selling pressure was going to pile on this would be the time for it to happen that day!
The trade was alerted at 1:50PM EST.
The market proceeded to sell off violently into the close giving us an ideal entry on this trade!
The next morning the market open with a decent gap down so we used this opportunity to book our $SQQQ gains!
Part of the reason I took the gain at the open was because $NYMO and $NAMO charts were starting to signal an oversold condition. These conditions can lead to quick upside bounces so protecting the short-term gain was the #1 goal here!
Here was the tweet showing the game plan going into the open with the reasoning behind it!
We closed $SQQQ for a +9.75% gain. The trade was initiated shortly before 2PM the previous day and closed into 930AM EST the next day!
$ERY Trade Review – Long Side Trade
From 1/20/22 into 1/21/22 – Position Closed
We took the $ERY as a pullback downside play in the energy sector. Just like $SOXS this an inverse leveraged ETF. $ERY does the inverse of what $XLE does basically. I tweeted this $XLE chart highlighting the idea!
$XLE had distribution volume characteristics, overbought RSI conditions and a multiday topping phase. So, I started to look at $ERY for a potential play on $XLE’s potential continuation momentum to the downside!
Shortly after posting this chart, I alerted $ERY long!
We used the recent low as a gauge for our stop and placed the stop slightly below this area, at $7.50!
The very next morning the market opened lower. We took this gap down open opportunity to sell our $ERY position. We sold our $SQQQ position around this time too! Booking the gains into the gap down just in case of a Red 2 Green scenario.
$BZ Trade Review – Short Side Trade
From 1/21/22 – Position Open
Late day Friday we went short $BZ. This stock was on my radar because it had recently lost support on the daily timeframe. The stock had bounced from a recent low and RETESTED this support area. Bearish stocks love to retest support areas before failing again. Support turns into resistance! This is what I was looking for in order to trigger this trade short!
As soon as it became clear that support had turned into resistance I wanted to be in this trade on the short side. We initiated this trade late day Friday.
The idea was to play on late day weakness since that was the trend each day this week!
That’s it for this week’s trade review!
Cheers and Happy Trading!
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