MS, SDS, SPX, And IBM

Morgan gapped down at the open, from 28.27 to 27.85. I decided that I liked the H&S Top and the risk:reward on the trade well enough to go ahead and short it if I could get it at a 50-61.8% retracement of the opening gap, so 28.06-28.11.


I went with the 28.10 for a short entry, but I didn't get filled. It didn't matter if I had chosen the 28.06, either. The session high was 28.04. Curses! LOL.

From the weekend, on the 21/34RSIs at Bearish Synchronicity:

"...the release of that "compressed energy" ... often results in a nice move, which sometimes can be quite explosive."

It sure "looks like" the SDS exploded out of that DOUBLE breakout of the Falling Channel and the Ascending Triangle! LOL.

This chart also is an excellent example of "Bull Traps" and "Bear Traps." Since this is an inverse fund, we have to "think backwards." On Friday, the breakdown of the validated channel (white arrow) was a Bear Trap for the SDS players, therefore a Bull Trap for the SPX players.

Both legs of the "W"-Bottom (in blue) violated the channel, "trapping" SDS players if they thought the breakdown was bearish, thus a "Bear Trap." We came into Monday morning with TWO patterns in place: The Falling Channel and The Ascending Triangle. On the gap up opening in the SDS, the Bear Trap "got sprung." Anyone shorting the SDS on Friday's breakdown (the blue circle) got SERIOUSLY trapped on the Gap Up opening. Similarly in the SPX, the Bulls got trapped on Friday's move to SPX 927. On the Gap Down in the SPX yesterday morning, The Bulls were SERIOUSLY trapped.

When a trap gets "sprung," we get into a situation where "selling begets selling" when players see that there isn't going to be much retracement of the opening gap, thus this "power move" higher in the SDS as the SPX went down.


A problem that I have with "playing in size" is that if I pay "just any price" for a stock or fund, it can cost me a fair amount of money. The Gap Up in the SDS was to 56.59, from 55.60. I knew that I wanted to be long the SDS after the Gap Up, but if I could get any kind of retracement at all, back near the 56.18...56.14...56.11 top of the Ascending Triangle, I'd really rather not "hand over" a $700 - $800 premium by paying the 56.59 opening price, if I can get it on some kind of gap retracement, which often occurs. Another consideration was that a good part of the gain already has taken place on the big gap up, so the risk: reward on the trade isn't very favorable with the Ascending Triangle target at 57.52.

I went with an entry at 56.22, above the top of the Ascending Triangle but, obviously, I didn't get it. I got shut out on BOTH of my orders. Cursaes! lOL. That's fine. Quite often, I do get filled on those gap retracements.

The 57.52 target got MADE, and a good bit more on the DOUBLE pattern breakout. Muliple breakouts and "nested pattern" breakouts and breakdowns do "tend" to give strength to moves, as this one did.

The Descending Triangle (10-Minute chart with the Triple Bottom at 915, posted at the weekend) target of 904.15 got MADE, and the Bear Flag target (daily chart) of 898.18 also got MADE.

From June 16, on IBM:

"Looking at the pattern in red, are you thinking what I was thinking yesterday morning, when I sold IBM into a "possible" Right Shoulder?"

This is the BEFORE picture, posted last week...

...here's AFTER. I got busy playing other things, but IBM would have been a nice short. After the neckline breakdown, there was a 2-3 hour "knuckle-biter," when the stock went back above the neckline, but the second attempt to regain the neckline (red arrow) was a failure, smack on the neckline. Down she went...