Trade That Trendline!

     I came to a landmark conclusion about this blog today: There's nothing set in stone that says I can't stray from my Sykes/Swing strategy if I spot another opportunity to profit from this market's recent volatility. If you've read my past couple of posts, you know I've been trading FAS and FAZ, two ETFs (Exchange traded funds) that mirror the ups and downs (respectively) of the financial sector. I profited from FAS, as shown in this post, and held FAZ short overnight (3/5). Below is the chart of my two recent FAZ trades- yes, TWO. The first short was not real disciplined, and planned to be a longer term hold if necessary. Even though I was only short 35 shares at $95, I was more than ready to cover when it closed just shy of $100. Since this isn't my primary strategy, I wasn't comfortable holding FAZ overnight. As the volatility in these two ETFs have shown over the past year, it's kind of like holding the tail of a dragon. When the market opened, I waited patiently (never easy) for an opportunity to cover. Once it broke $94, I sent my limit order of $94 to TOS to cover. Since this thing was tanking at the time, my order was actually filled at 92.85 (fine with me). My next trade was far more honorable. I've studied technicals over the past few years (books, DVDs), and trend lines are sometimes screamingly obvious to spot. Not sure if Muddy over at Darkside Trading was using trend lines the last couple of days when he traded FAZ profitably in 53 of 54 trades (ridiculous), but I sure did:

     Notice how FAZ stays within the trend lines I've drawn until it goes a bit too parabolic, giving me the opportunity to short above 110 (psychological round number). Also, as you can see at the bottom of the chart, the volume at that point had dried up (lunch time). I could have covered the first time it settled back down toward the lower trend line, but since one of my precious day trades was at stake (thank you PDT Rule), I rode it out a tad longer. Really wanted to short over $110 again later in the day, but wasn't thrilled about holding it over the weekend (which I happen to be taking off to visit my brother in Ft. Lauderdale). Looking at the after hours price (under $100), it probably would have been a good trade- but thanks to Charlie G.'s reminder, I need to be more disciplined.

Enjoy the weekend,

Evan