VXX call trade
On Friday, February 21, the market was set to break a trendline connecting the October and December low.
It had done so in January, but the SPX rallied up to make a new high.
On Friday, the SPX was perched on a test of its prior January high, but the break of the trendline on a Friday weekly closing basis suggested that the February high was a secondary high… a test failure.
If so, the index was going to knife below its prior high with authority and we recommended subscribers buy March 15 VXX calls.
We were filled at $1.43,
Selling half at $2.46
And the back half at $3.65.
The rest is history. The SPX gapped below its 50 day line on Monday, February 24 in what was to become the fastest drop off an all-time high in history.
In addition to the price action, my cycle work suggested that the 90 year cycle could exert its influence in a stunning way. Hence, VXX calls were a good vehicle to play my presumption of an expansion in volatility.
SDGR was a hot IPO in early February.
Typically, after the hot money flips out of a sought-after IPO, buyers will step in.
The trick of the trade is to determine where and when they will step in. I stalk the price action watching for signs of accumulation.
SDGR set up my Hot IPO Pullback strategy on its first pullback into mid-February and I recommended subscribers take it long as it carved out a narrow range contraction day. It looked like everyone who wanted to flip had done so.
Often an NR 7 Day (the narrowest range in 7 days) will signal an expansion in volatility.
It certainly did with SDGR.
With a hot IPO, you obviously don’t have much data to go by, so I will look at the behavior in the first 3 days.
We were filled at $27.90 on Feb 12.
The stock went a tad lower initially, but we were not stopped.
SDGR exploded from 30 to 48 in 3 days.
In keeping with our Hit & Run, Trim & Trail strategy, we sold half at $30.40
And the 2nd piece at $35.42.
FB left a false breakout on January 29.
False moves lead to fast moves and FB reversed decisively from a new high to below its 50 day line in just 2 days before staging a counter trend rally into February 18.
The retrace into February 18 satisfied an open gap off the high, with FB leaving an LROD or Large Range Outside Down Day on February 20.
Subscribers took it short on February 21 at $209.75
Covering half at $204.55 and the 2nd piece at $201.50.
Notably, FB’s reversal from the LROD and another close below its 50 day moving average elicited another gap down on February 24.
On February 7, GDXJ resided in a correction to its 50 day line when it carved out an outside down day.
These are typically bearish and should have resulted in a break of the 50 day.
It did not. There was no downside follow through.
This was a canary in the gold mine.
We stalked it.
It looked coiled and we surmised if it wasn’t going down, it was probably going up.
If so, GDXJ was going to offset the high of the Feb 7 reversal bar leaving a bullish Reversal of a Reversal buy signal or what I call a Keyser Soze.
We recommended the March $42 calls on Feb 10 and were filled at $1.15
Selling half on February 21 at $3.37
And the balance on February 24 at $3.62 into strength.
Silver miner WPM left a 180 buy setup on Feb 6.
A 180 occurs when a stock is strongly trending, defined by it being above its 50 and 20 day moving averages.
It closes at/near session lows on Day 1. The setup occurs on Day 2 when the item closes at/near session highs (a 180).
The 180 in WPM occurred in the context of a 2 month Cup & Handle within the context of a 5 month Cup & Handle. Cup & Handles are bullish patterns and patterns within patterns often create a larger-than-average likelihood of an explosively successful setup.
Consequently, we bought calls as well as stock in WPM.
On February 19, CRUS was used as a short setup.
It was in a weak position skating below its 50 day line and had retraced to kiss its overhead 20 day moving average.
This setup a Holy Grail sell signal… a backtest of a declining 20 day moving average.
CRUS rallied up on February 19 and we were triggered short at $80.07.
We covered half at $79.08
And the second half at $72.24.
Notable is the Bear Flag from February 3 to February 21 prior to CRUS gapping lower.