How Low Can You Go?

As you are watching the spoos drop away from VWAP as if it was infected with the Ebola virus I already know the question rattling around in your rodent brains: How low can you go?

No worries – the Mole has you covered. Let’s look at our treasure maps for some valuable clues:

The hourly triggered a NLSL breach early in the session and it’s been downhill ever since. A good early sign was the 25-day SMA resistance which could not be breached. Preliminary hourly target 1380.

The daily panel now shows us not one but two failed NLBL breaches, which as you can imagine is rather bearish. The 25-day SMA is at 1380 as well – nicely lining up with our short term target.

And let’s not forget our volume profile chart which shows a deep volume hole near – you may have guessed it – 1380. I guess 1380 it is then. Caveat: This is a preliminary technical target and does not account for any Fed/ECB monkey business. But if we get there and start painting a floor pattern then I will start taking on some long positions.

One more freebie before I get to the setups. Here’s a good reason for why I told you noobs to start reading up on vega and option greeks in general. In two days the VIX almost jumped 20% – that’s quite something and had you held puts purchased near the 14 mark then you are sitting very pretty today. Strangely enough, even if you held calls from three days ago you are probably in the red but not hugely so as option vega benefits both puts and calls. That’s why anything below VIX 15 is definitely vega buying territory and anything above 30 is considered vega selling territory. It’s not that easy of course and playing with options is as much a science as it is an art. I personally love them – but it’s not for everyone and trading them takes a lot of discipline and knowledge as theta burn is a real bitch.

If you’re new around here then I recommend you guys start familiarizing yourself with options over the next few days. Don’t worry about spreads and complicated option strategies – that’s for later. Learn about the greeks and the basics, e.g. ITM, OTM, vega, theta – gamma and rho are really not that important until you become more sophisticated at the game.

Alright, I have a few more setups and perspectives to share – please step into somber lair:

Crude is sitting right at the bottom of a two month trading range. This one of those quirky Mole setups where he suggests you to be long but hoping to be stopped out a few ticks below to ride this beast lower.

Cotton kind of ran away from us today – sorry for not putting this up yesterday but as you know I was otherwise disposed and thus a bit distracted. IF we get a retest then I’ll be definitely looking to get long here.

Gold is now getting very interesting as it was rejected at the 25-day and 100-day SMA. Even if we push higher I would try a short position near 1695 – if we drop through the NLSL 1646 I would also take on a short position. In the interim I am going to do nothing and just wait.

Sugar is looking super sweet today as it just bounced off its 100-day SMA. You know the drill by now, right? Be long here but only as long as it stays above 24.25 – easy number to remember.

If you’re more a sweet corn syrup kind of guy I got you covered. Corn futures just dropped through very important support and I would not chase this sucker and wait for a ‘last kiss goodbye’ a.k.a. as a retest of the prior support line.

That should keep you guys busy for a while. BTW, did any of you take that EUR/JPY or/and the GBP/USD trade yesterday? I hope you did! 😉

Before I go I would like thank everyone for all the support and the kind wishes over the past two days. This really means a lot to me and it helps to know that there are other pet lovers among you who can empathize with the loss of an old friend:

RIP Stripey – you will be missed!

Cheers,