S&P500 short term bearish scenario

T

traderkay

OK, here's one scenario I see. Please feel free to take it apart and agree/disagree *with reasoning*. I'm looking for flaws in my analysis. Everyone welcome to reply except Jack:)

Bearish SCENARIO:

We have a descending triangle here, or something that kind of looks like it:) We need a clear close below S2 to go short, the stop will be the high of the bar previous to the one that closed below S2. The target will be S1, which also happens to be the measured move target A=B.
 

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OK, we're in short (on paper:). Unfortunately the thing gapped down on us, so there wasn't an orderly break of the triangle's horizontal line. This pretty much would leave us with the question: do we still wanna enter on the gap or not? To be fair since I did not outline a specific case for dealing with a gap, we'll say that we entered at the close of the first red candle under the horizontal line, which would be approx. 84.98 in SPY. Stop is 86.74 which is the high of the previous candle +0.01. Unfortunately, the entry after the gap has cut our Risk/Reward to 1:1, rather than the expected 2:1 or 3:1 incase of a clean break. O well, we're in, the target is still 83.22. Just sticking to the plan here.

P.S. In retrospect, the more efficient entry would be to enter in the 24hr market, then we wouldn't have to deal with the gap down and would have a much cleaner break. But who wants to stay up all night to enter a trade? Me?:)
 

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Quote from TGregg:

For what it's worth, rumor has it that the invasion of Baghdad takes place in 48 hours.
More...

i wouldnt want to be short when the invsion takes place, too volatile no matter what happens for you "pattern-techie types" but it is a gorgeous pattern on the 60 min
 
I like to use triangles also, but I just don't like the risk/reward.

Also I think the intermiedate term downtrend was broken on 3/13 and now we are just seeing how far the retracement will go. This thing could pop back up at any time.
 
As for the rumor of 48 hr invasion, i can find no mention of it anywhere else, so its bullshit until proven true. We could potentially invade at any time, but I think they are trying to minimize the potential resistance, and will wait another week at least.

But, the truth is you can't trade based on when we invade unless you are the freaking General who orders it. Better to look at the charts.
 
O boy I had a bad feeling about this. It gapped against our short position at 87.54 over our stop which was at 86.75. We covered there at the open 87.54 for a -2.56 loss. so much for the great experiment:)
 

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