Those Who Missed Shorting XLF, Are You as Depressed as Me?
- Thread starter shortie
- Start date
Typically what I've found with the bigger gaps that are going to fill is that they will do so pretty quickly, often starting on the day they occur. Those that do not often go for months and sometimes years before they will fill.
That said if the XLF trades under the LOD established on Tuesday it will have a very high probability of filling that gap, and I'd short it myself then. At this point in time though the only action you could take in the short to intermediate term that has a valid edge is to sit aside and do nothing or go with the gap and thrust move higher.
Brandon
Shortie, I am very close to wiping out 30% of my YTD profits based on this kind of thinking. I am the first to admit that is a result of very poor risk management, but it the thinking you outline above that put me in a state of mind to allow the poor risk management. With that said, perhaps my stop will never be hit, the trade will continue to follow the new trend in my favor and I may even get out near break-even. But I assure you that as long as I am of sound mind and body, I will NEVER again trade on assumption or expectation.
Brandon, I like your technical analysis on this chart a lot. You are choosing a very safe short entry signal as opposed to the assumptive short entry sans signal.
All that said and done, the gap was a result of a piece of immediate good news (Wells Fargo, one of the most stable banks around, made money first quarter in an environment where you'd have to be functioning without a pulse to lose money as a bank), and have to agree with Shortie that this will indeed be a fantastic short. The factors affecting profitability are, as always, timing and risk management.
So what, it was hard for the smartest people in the world would be looking the other way and let the entire financial system fall into shit.
Things that should be statistically impossible happen all the time in the stock market. Your going to go broke with a mindset like that.
I'm not saying not to trade on bias and opinion, I think you MUST have both to be effective, but I think your's is flawed and based on emotion and the crowd (ie 90% of the other traders your talking to agree with you that this is fucking stupid)
Excellent thread!
Banks would take this rally as an opportunity to raise money, and pay uncle sam. It will also be an opportunity for claiming leadership--- the first to pay would say I am the best. I would expect Goldman to be the first to play such a thing. It is all in the symbols. Who knows, Goldman may have started shorting in this rally their own shares, or the shares of others, which they can cover by issuing newly minted shares.
I would expect great earnings, followed immediately by some sort of public offerings from the likes of Goldman, Wells, etc.
I would place XLF near term top at around $11.20 or less. Friday's high is $10.70, which is in the neighborhood.