Only The Paranoid Survive

Which is of course the famous quote (and book title) by Andy Grove, the founder of INTC. Well, if you are a sub you probably recall last night’s warning I posted after the inside candle mini break out:

UPDATE @ the closing bell: Those fuckers – okay, now the game is a bit more difficult as they may shake out folks taking the prior single inside day signal.

So it’s fine to go long here – but only play it in the spoos – do not buy SPY or DIA, or IWM here and sit on them overnight. Those cats may turn a fast one on us and you want to be able to hedge yourself overnight as soon as today’s highs are being taken out again during AH monkey business tape.

Also do not use 1240 as your stop – stay nearby. I don’t like the timing of this breach and we need to err on the cautious side. Okay, you have 10 more minutes to play the spoos – have fun.

And of course the night shift dropped the spoos after hours to 1249 only to ramp them up a few hours later to produce a five handle gap at the NYSE open. After a spike higher (which the Zero Lite didn’t believe for a second) it’s been downhill from there and the result of all that mayhem is what I would call the retail trader woodchipper from hell. Now, I’m elated that I issued this warning and I hope that you guys hedged any long positions you may have taken on at yesterday’s close. But even if you did – unless you are vampire and don’t sleep at night you probably missed the late night ramp up following into the open. If you did nothing you woke up to some nice profits and hopefully closed them out as soon as the Zero was going flat at the ramp higher.

All this goes to show that we always need to be paranoid about falling for obvious market maker bait aimed at reeling us into overnight traps, stop runs, and early morning gap squeezes. All of them result in overtrading and most likely in losses and psychological damage over time. The former can be remedied with proper position sizing, discipline, a trading system with a proven edge – the latter may lead you into short sighted (and emotional) trading decisions you will regret in the long term.

In summary: The way to play an inside candle breach should preferably be during trading hours – unless of course you live in Asia and AH tape on the spoos happens while you’re awake. Or if you are a vampire or werewolf – which from a trading psychology perspective may very well work in your favor.

However, running like a hare left the spoos with new technical information that we may benefit from. When I took this snapshot half an hour ago the spoos were pushing toward a cluster of NLSLs and I was about to point them out to you. However, since then there was another one of those surprise! ramps higher (I think the timing was similar as yesterday’s) and we now find ourselves near two hourly NLBLs around the 1268 mark. I think we have a decent chance of pushing above those but frankly I’m not sure if I want to take this if it happens near the end of the session – those bitches have been having way too much fun lately.

What’s a lot more interesting in my mind is the AUD/JPY as that’s where the real action is. I also have two more FX setups for my intrepid subs. Please step into my badly ventilated lair:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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Again, quite a bit of movement in the past 30 minutes and I had to take a second snapshot. After testing support the hourly is now pushing into a cluster of buy net-lines around 80.6. A push higher from here is possible but there’s also that 100-hour SMA which yet needs to be cleared.

Those Euro traders have been very busy bees as well – similar setup and we have a wonderful net-lines box between 107.15 and 107.54 on the hourly. The daily NLSL at 106.87 was refused – funny how those net-lines pay off over and over again 😉

Also had to take a second snapshot of the EURCHF. You recall our long entry and the ramp higher. Since then there has been a shake out attempt and it came all the way down to where I would expected temporary support in the form of the lower 25-hour BB line to kick in and hold the barbarians storming the gate.

We now have an hourly NLSL at 1.2366 and a breach of that would be defcon 3 – a push lower into and below 1.2342 (i.e. that very lower BB line) is where things get very uncomfortable and I would probably take my money and run. Of course a push above 1.2396 (i.e. the 25-hour SMA) followed by a push above the upper daily BB line (i.e. 1.247) would most likely be good for a trip all the way into 1.2823.

In other words – the current hourly NLSL is a good reload opportunity with a stop just a few pips away.