There is so much I don't like about this rally (I have addressed this a lot in the past) but price is the ultimate arbiter. So, it is not my nature to be closed minded. Am I ready to go long? No...but the market doesn't care about my readiness.
Let's recap my trading:
1. I am short -25 4300 calls at $7 that expire End of February. I raised $8,679 in premium. Today those calls appreciated to as high as $16.50 so my trade drawdown was a staggering 120%. Currently the price to buy back is $12.50 which would cost me $15,554.50 so almost double what I raised. Now, in truth, those options have NO intrinsic value. Their only value is those options have 27 days of life...but they're worthless below 4300. I made a hedge trade that profited $7350 so account wise I'm not in a bad situation at all. This strategy is my edge. I spend a lot of time analyzing charts but my trade strategy is encapsulated by planning on being wrong and profiting. Hopefully that makes sense. I hope to educate on this strategy as I think it's the only way to trade as a business.
Lets recap my analysis:
I believe I have misjudged this rally off the 3502 low. This has moved higher much faster than I anticipated and in the interim, (even though I knew price would come into the 4300-4500 area)...I didn't anticipate for it happen so fast. But I have given price every opportunity to retrace into the areas I have been anticipating 3850-3700 and that hasn't happened. Therefore I have look at this with fresh eyes and come up with a rational means of profiting from the price action. So let's discuss the details.
1. The upside officially is not confirmed until price breaches 4180 which hasn't happened.
However, we're above ALL Fib retracement levels. Price is not screaming at us, but it's definitely raising it's voice it has intentions are go beyond the 4180 area. So, "Price, you have my attention".
Sidebar: Back to my strategy of selling premium. I still have 160 points to fashion a hedge. I cannot stress enough that trading for profit is different from just trading. IT IS MY JOB TO PROTECT THAT POSITION. I will take action to either protect through hedging, or trading around that position, but I cannot stress enough, this strategy allows you to be wrong, and still profit. It is my central strategy. Some people are married to crypto, stocks, or indices. I'm married to profit. This strategy affords me the highest probability of profiting the vast majority of times.
2. Giving price the benefit of the doubt, I have to claim the 3788.50 bottom in mid December is our b wave bottom. If I get get proven wrong so be it...but risk management dictates for me to posture my trading that price is going to 4300-4500. I do not see it going there in February...but I'm going to be open minded.
3. Therefore based on our b wave being done we have key resistance areas at:
(1) 4180 which is the prior high (2) 4207.50 .618 Extension of our a and b waves (3) 4309.25 is the .618% retracement level of the entire decline. Expect a reaction here. (4) 4321.25 .786 Extension of our a and b waves (5) 4327.50 The August 2022 highs (6) 4466.50 The 1.0 Fib Extension
If we get over 4180, these are the price points that become essential to me to trade around. If we fail to get above 4180, then we can decline in a flat back down to 3788 area of higher, but that's the parameters as of now.
Lets look at the micro count: Whether this is a c wave top (abc off of 3788 not to exceed 4180) or wave 1 of a larger c of b into the 4300-4500 area is yet to be seen. 4180 will answer that question for us.
But I'll be watching for a retrace in a wave 2 to potentially put on a long mainly for hedging.
I'll update in the morning but this is timely analysis and I wanted you to have it tonight once I finished it.
With that I’m done for evening.
Best to all,
Chris
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Short Limit -3 4207 and could restrike at 4210
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Changed short to 3 ES contract at 4198 will hold back rest for 4207-4210
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Getting micro overlap now so this maybe topping now
Dear Mr Elliott, please see to making the markets have a very brutal decline (wave iii of 3 kind) tomorrow. That would be much appreciated, signed someone who didn't marry profit.
@maikisch , how did you predict the exact high and low for that run? lol
maikisch
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@tekkitdoodle, Fibonacci Extension Tool
TopGMartini
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@maikisch, I see. Hey I have -5 outrights sold at 4000… Wish me luck lol, when do you think it will get back down there?
TopGMartini
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@maikisch, Also, do you have a youtube video that you can send that will teach me how to use the Fibonacci Extension tool? I see it on ToS but don’t know how to understand the data to predict highs and lows
rpersing_bh
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Looks like the rally has run out of some steam?
Thanks for your posts Chris!!
maikisch
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@rpersing_bh, Wave 3 looks to be topping...and wave 4 beginning but we need below 4180 to confirm that. But then we need a wave 5 higher so we're probably not done to the upside
rpersing_bh
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@maikisch Will be following to make sure wave 3 completed and hopefully in wave 4.