Trading Journal #12
08:40 am: Futures green after yesterday hitting very oversold conditions. The size of the bounce will give us clues on what’s next but for now I am dealing with this as an oversold bounce as we are still below Friday breakdown levels. Futures are also fading a bit from premarket highs, so I will use those levels as key resistance for now.
08:41 am: Morning focus on Tech and Semi’s as they have been beaten down hard since Friday. Some stocks are gapping up this morning, so first let’s see if they hold the morning gap to squeeze up or fade to fill the gap which can bring sellers again. Depending on how gappers hold or not, I will be looking for some squeeze up on beaten down stocks.
Morning Trades: I started the day looking for an oversold bounce so I took some AMD and AMZN Calls but they didn’t break higher so I cut the trades and flipped gears. I saw BIDU breaking down so I shorted PDD and AMZN with some Puts which basically gave me the money for the day. After that I tried “catch the knife” on AMD and SPY but closed as I don’t like to get chopped on slow action.
Losses review: I had small paper cuts on AMD but I’am ok with that because they were small bets to test the waters and also very tight stop loss, so I’m ok with taking those small paper cuts.
Key Takeaways: Oversold can remain oversold, so although I was looking for an oversold bounce, when I saw the bounce failed, I flipped gears and shorted other stocks which made the cash flow for the day, so stay flexible!
Look Ahead: We are hitting very oversold readings, but the market still didn’t find buyers, and we still have some gaps lower to fill, so staying open minded. Although, be careful to short the lows, because when we are at extremes on short gamma, we can get a violent move into the opposite direction anyday, so manage risk wisely.