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Back-To-Back Distribution Day Force A Bearish Trading Bias

Back-to-back distribution days force us to lower our trading bias to Bearish. The ISM services index dropped a record amount. Indexes dropped below their 200 day average. Is a technical rebound possible? Never anticipate or speculate. Click here to get today’s free options advice; have A.J. explain option trading to you in everyday language.

Hey trading team,

This is A.J. on Wednesday, October 5th with your Trading Trainer web log. We are your home of market insights for the serious options trader. This web log will cover the events in the market from today as well as prepare you for watching the market tomorrow.

A back to back distribution day; that’s what today was team. Perhaps spurred by the Institute for Supply Management’s service index dropping a record amount, perhaps spurred by oil dropping – and all energy related stocks dropping - on word that demand has been curbed drastically, or perhaps just on the long term negative buildups of events that’s been backing up in the cue without being faced… till today that is.

Suffice it to say, all but our NASDAQ index, dropped through major levels of support. Many 200 day simple moving averages were breached. All Williams %R indicator shot to extreme oversold. I had to drop our overall trading bias to Bear from Neutral.

Now this is the time that separates the real investors from those that can’t separate themselves from their emotions. It’s during these times of bias changes, when exiting long trades, no matter what – I’ll be it, take some time and exit elegantly, grab as much profit and minimize as much loss as you can… but when the bias goes bear, being long is wrong. Instead you want to be short.

Follow the trend. I’ve seen so many investors revert to their emotions saying to themselves… this downtrend must be temporary. That’s speculative, wouldn’t you say team? More times out of not, those investors are wrong and they loose their shirts. I’ve done it a number of times myself. Don’t fall prey to that type of thinking. Follow what you see and know not what you feel and think.

If next week, our bias turns bullish again, no worries, exit your short positions and go long. And, by the way, a technical rebound is possible and highly probable. Learn to roll with it. But never anticipate or speculate. The point is, if you are long right now, look for your exits. And, at this point, look for short entries.

I sold my Autodesk November 45 Calls, after receiving a trailing stop loss alert, at $3.00 per option. My return on invested capital is 58% after being in the trade for 8 days. I sold my Joy Global November 50 Calls, after receiving a trailing stop loss alert, at $3.20 per option. My return on invested capital is 60% after 8 days. Both very respectable gains team. My Techne January 55 Call closed down today at $4.10 per option. I’m 32% into my initial investment on this one team.

Team; tomorrow is a day of light news which means probably little market movement. So, tomorrow is a day for you to clean up your portfolio. Take your profits where you have them and make the hard decision to cuts some losses. If the market rebounds tomorrow or Friday, so be it. You can get back into you long positions another day. But, the worse thing ever is staying in a clear looser. Again, act on the evidence you see and know not what you feel and think.

Okay, team. I’m done.

Till tomorrow, happy market watching, trading and money making. Trading Trainer is here helping you create your dream lifestyle.

Best regards always,
A.J.

Click on the below play button to hear the blog as an audio from A.J. himself!

Do you want to learn option trading? Full time options trader, A.J. Brown, reveals option trading secrets in his daily audio / video newsletter that are guaranteed to make you massive profits in less than 30 minutes a day. Visit TradingTrainer.com now.

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