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Published 4/12/16 11:19 am central – Email Explaining Trade Recap and Stop Out
I wanted to take a moment and recap the short position that was executed from the MDA SnapShot this morning. It is an example of how Fundamental news and events can come out of nowhere and how they trump technical setups. Trades come and go, but I like to highlight when trades work out as well as when they do not work out. In my opinion, we were at a tipping point in the ES for us to push into new low levels and having bears take control. So I think this was a unique situation where we were about to take bears into control and fundamental news stop them in their tracks and we are now almost 20pts higher. We stayed disciplined to our risk level and even though the trade time frame was extremely shorter than anticipated, we didn’t add to the position or increase risk. If we did that we would have had an even larger loss on our hand as the market traded up another +8pts after our stop out. So almost doubling our loss and if you are a trader who adds to losers you could have increased leverage and even saw losses of 3-4 times more. Nobody likes being stopped out but one or 2 good trades this loss can easily be recovered.
This morning we saw the market move slightly higher, but as we outlined in the Market Action Scanner and write up this morning, I was waiting for selling pressure to come in and challenge the sell zone. We started to get some selling momentum and we did get filled on our 2033 sell zone. In my opinion, we had some strong selling momentum behind us and we were in a position to potentially make new lows on the day and look to test the 2028-2029. About 5-7 minutes after the short zone being filled the news wires were hit at 9:30am central time, with headlines announcing Russia and Saudi Arabia have potentially met an oil output freeze or an agreement to start freezing oil output. This, of course, is a very bullish confirmation of Oil as the supply issues have been a major reason why we have seen decreased prices. This announcement saw crude oil move almost a $1 higher. Since oil and stock market has been heavily correlated recently, this fueled buying/support and selling of short positions and shot us almost 9pts higher in the ES instantly. After the initial pop higher, there was a quick chance that we could go lower but bulls held strong @ 2035.00. There was a chance that pop higher could have squeezed out shorts and would make it easier for us to go lower, sometimes on reports or news, we will see knee jerk reactions one direction and then the same type of move the other way. This, unfortunately, didn’t occur. we moved back higher and ultimately stopped us out of our short position and continued to make new highs on the day.
Below you will see a 30 min recap of the trade as well as a 5 min chart showing the move after the news announcement. It is an unlucky scenario, but we wouldn’t be complaining if we were long. It’s all a part of the trading game and you have to take what the market gives you no matter good or bad.
Click for larger images
30 min SnapShot Chart
5 Min SnapShot Chart
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