Monday, November 21, 2011

Big gap down, but buyers step in

A weak opening for the first day of the week (influenced by talks about the failure of the supercommittee and of course Europe). Indices opened about 1.5% lower and kept falling in the first 90 minutes. From there on it went mostly sideways for a couple of hours.
When price gave the impression to revisit the lows of the day, all of a sudden buyers came in with lots of volume (see white arrow on SPY-chart, in the trades-section). After some consolidation we went quickly higher, only too reverse just as swiftly. Very choppy trading today, no clean trends or breakouts unless you would play a 1-minute chart maybe...

The last hour of trading brought a new boost higher with it. The opening level came in sight, but that's where the rally stalled. We lost quite some of the regained territory in the last 10 minutes of the session. That's why swingtrading this market seems like suicide (and requires nerves of steel). Anything can happen overnight and reaction to whatever news out of Europe is often very extreme.

A lot of hammers formed on the daily charts, although for many stocks/indices, the bodies seem to big to be hammers. Wait for tomorrow for confirmation if this is a possible (intermediate) low.

Daily charts DIA, QQQ and SMH below. We see lot's of big opening gaps, possible breakaway gaps. But also a lot of hammer-like candles forming...

(Precious) metals performed a bit worse than stocks. Oil also went down, but only slightly. Meanwhile, the euro bounced hard near 1.3475 but soon ran out of breath and fell back. Still, euro only down 0.20%, where indices lost about 2%.

I opened a split ratio put spread and a long put butterfly for small costs, all Dec. 16 '11 SPY-puts. Target is a close for SPY on Dec. 16 '11 between 117.50 and 100.50 with a maximum gain between 110 and 104 (risk-reward 1:7.5)

Three daytrades on SPY: two out breakeven and the other with minor gains (and on a small position).
1st trade: after more than 90 minutes in the session, 2 hammers were followed by a big green candle on big volume. Long 119.03, out 12 minutes later, 119.05.

2nd trade: again playing a bottoming-pattern, long 118.90, out 1/4 @119.21 and the remaining shares at 119.12 (I just missed a second partial exit per 119.48 by 1 cent).

3rd attempt: long SPY 119.57 on consolidation after the huge up candle (accompagnied with big volume). Another breakeven, out 1/4 @119.83 and the remaining position @119.51. Today's trading is just too choppy and I didn't want to risk much, so rather tight stops to keep me out of trouble.

5m-chart SPY:

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