As I’ve noted in ‘Today’s Action’, merely knowing where the S&Ps are likely to top does not necessarily make it easy to short the little sonofabitch. The futures have spent the last few days playing cat-and-mouse with our 1708.75 target without actually touching it. Equally frustrating is that pullbacks have been shallow, suggesting we are seeing a consolidation rather than a distribution. Even so, I’ll suggest sticking with the camouflage shorting strategy if you have the patience. Your odds will be best if you initiate the trade within a few ticks of the target rather than several point below it.
And while you’re waiting, consider taking a small shot from the long side, since any profits you make on a rally toward 1708.75 could be used to cushion a wider stop-loss for the eventual short. An example of a set-up that traders could bottom-fish without camouflage and using a stop-loss as tight as two ticks (!) is shown in the accompanying chart. Click here to learn how you can reduce entry risk by using the ‘camouflage’ trading technique.
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