EXTRA PRIMO GOOD MR COLEMAN SIR!
This is a line from my favorite movie Trading Places from the very end after they got over on the Duke brothers and were on the desert island celebrating. It also applies to the setup below.
I am looking for a long entry in the VXX which is the stock proxy for the VIX futures. This setup here is why I am doing so. It is the same chart I posted this past weekend with another day having gone by. Breakouts up and out of here where I have marked with the red arrow and the b should be taken. We have confirmed momentum uptrends and are right at the standard deviation bands I use. Of course the one negative is the major bull market we are in, and this is a counter trend trade. We only see stock markets this strong every so often, so you must be careful swimming against the tide as I stated over the weekend. It certainly appears we are going straight to at the very least 1235 in the SP 500, which is the .618 retracement to the all time highs.
Who is to say we stop there, when you get a running market with momentum like this it is just impossible to pick a stopping point. This is one of the main reasons why I sell below the market and buy above it. This way I at least have the short term momentum moving in my direction when I get pulled in. This has kept me out of trouble time and time again when my market direction has either been wrong or early. There is no perfect approach, at times this still gets you into lousy trades going against the trend. Of course all losing trades look bad or dumb after the fact.
One thing to be mindful of with the above setup is that one of the best ways that has evolved to use the VIX is to follow it's trend. In the "old" days, people used absolute levels in the VIX and those are worthless nowadays. The VIX is trending down now which is supportive of a stock uptrend. This is why I have harped to wait for confirmation for any trend reversal trading. Confirmation can be many things depending on your trading style. For me I like using momentum oscillators for early warning, the breaking of certain levels in price as my triggers. There is no panacea here you just have to use whatever works for you.
The one thing I would recommend against is using what is comfortable. Comfortable usually does not work in trading for too long. We always gravitate to things to make us comfortable because there is a self reinforcing mechanism in the human psyche that tells us we are protected from harm when we do this. At times that may be true, but I would assert that you need to be out of your comfort zone to be successful. Just cruising along is a fine way to live life, but it will not enable you to excel beyond others.
Sometimes I feel like an idiot for looking for these couter trend moves when the market just keeps marching along. However, that feeling lasts for a brief second. I stick to my approach come hell or high water. I do not want to be doing what everyone else is, even if at times I get beat up a bit. I know in the long run that following the herd will ultimately lead you to the slaughter. This above trade if we get some short term strength is a setup that has worked for me over and over if not on every trade. When we get these I take them and do not look back. I use stops to manage risk, and off I go.