We finally broke out of that forever barrier triangle to the downside — retested from the underside — and dropped overnight. However, the drop didn’t last long – at least not so far if it hasn’t completed. Don’t know yet whether we will retest lows or if we have already begun a larger wave up.
We exited our small position in SPY puts at the open. The drop overnight didn’t reveal its hand until the close yesterday. During the day, it was not obvious that we would be dropping today. The optimal time to exit would have been around 10am, so we were 30 minutes on the early side, but still profitable.
We entered SPY puts at a price of 2.53 two days ago on Tuesday and exited half at 3.50 and the other half at 3.89.
We only did 4 contracts to be conservative – as I was suspecting one of these dip – intraday things with a big bounce — like what happened today. Usually these down days don’t last more than 3 consecutive days and I wanted to keep position size small in case it bottomed overnight and I wouldn’t get a chance to exit during market hours (one of the pitfalls of using options).
In hindsight, would have done a larger position size. I was planning to yesterday — but needed the market to start moving down first — which didn’t happen until after the close.
The bounce today was much bigger than I expected – with the possibility that this could be the beginning of a larger wave up to new highs — IF there is sufficient follow through tomorrow.
The bottom was closer to 2107 – i was hoping to get to 2100 or a dip below, but it never happened.
A strong reaction to the upside after completion of 5 waves overnight.
Note a did not quite equal c – I was hoping for just a little more downside, but it didn’t happen after 10am.
where a = 2163 – 2122 = 41 pts
c= 2141 – 2107 = 34 pts
At this point 2120 is support. Bulls would have to go over 2130 tomorrow, otherwise, momentum would shift back down.
Indeed we retested the 2135-2140 zone from the underside — but the market didn’t show it’s hand until the close on Wednesday. The drop happened overnight into Thursday and stopped at 10am that Thursday morning.
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