Wednesday, October 28, 2009

Market Talk

Trend day down through major support lines -- we're too oversold to short and we're still looking long into panic selling tomorrow. However the 50 SMA and trend-line are broken and technically the rally from March is over for now. A new range now has to be created.

We had a good day mostly due to our SPY trade. Here is the excerpt from today's newsletter:

We wrote last night "If we can get to the SPY 105 area tomorrow (while in an oversold state) we feel that it would be a very good risk-reward candidate. We would be buyers, in size, of the first touch on trend-line tomorrow near SPY 105 and would be willing to spill some blood in order to stay in the trade in case of panic selling beyond the number." SPY broke the base, crashed through 105 and reversed for a bounce before taking it out again later in the day. A 50-60 cent bounce might not seem like much but remember, it's all risk-reward. If we're risking 20 cents then 50-60 cent profit is very good.

If you held of course it would have been a different ending. We've been having a lot of success lately buying the move away from the EMA (5 min/20 EMA), into support, and then selling into the bounce back into the EMA.