Our Trading Strategy during the Fastest Stock Market Correction in History
As the Stock market dropped more than 10% in just a week, we stayed level headed & avoided all the carnage. Here's a detailed post on how we traded during this volatile week.
I'll start my analysis from a week before this correction Feb 17th to 21st as it's important to understand what went through our minds before we started the correction week:-
- We came into the week on Feb 17th with 20% cash & 80% allocation into equities.
- As the week progressed, all our positions started to act well & there was little to no fear in the markets despite negative COVID-19 news.
- After the session on Tuesday Feb 18th, we had a good cushion on all our positions -> AMZN, GOOGL, AMD, ZM, TEAM, AYX. . Everything looked great.
- Here are charts of all these positions
- SPY This was the market summary update shared with members after Tuesday, Feb 18th session ->Today's gap down open was bought again as indices bounced at key levels & all our open positions acted well. Constructive action here in SPY as it consolidates near all time highs.Trend holds good as long as we're over 9/20EMA. Let's not overthink it!
- As the week progressed , we were seeing very few setups emerge as SPY started to stall without breaking out into new all time highs
- The underlying action in our positions were bad as we saw some wild reversals right after open on Thursday, Feb 20th .
- We started to took profits in most of our open positions & also moved up our stops on most positions
- This was the message sent to members on the same day in our private feed
- This is how we looked after the session on Thursday , Feb 20th. SPY Chart:
This was our outlook coming into Friday , Feb 21st:
- Futures down a bit today. Yesterday's action wasn't good , we'll see if it improves today. Will not force any new trades until market strengthens. $SPY Still holding above 20EMA. As long as we stay here , the benefit of the doubt will go to buyers in the near term
- As the day progressed, we continued to lock in profits on current positions & moved up stops on all our positions
- Mid-day update on Friday as market action unfolded: Weak action so far. We'll not force any new buys until market strengthens. With today being a Friday, it's a good time to just wait it out.
- Soon after, we got stopped out on remaining positions for small gain / breakeven as things got worse into close.
- So just like that , we went into the weekend with 100% cash
- This is how we looked after the session on Thursday , Feb 20th SPY Chart: We closed right over 20EMA but there was some intense selling on all our positions. Also notice the pick up in volume.
MARKET CORRECTION WEEK -> Feb 24th to 28th
- We started the week with a 3% gap down open on Monday, Feb 24th
- This was the morning update sent to members:
- QQQ was the better looking index as that gap down open near 50SMA was quickly met by buyers
- We started to take a stab in leaders of QQQ such as AMD, AMZN & 3x leveraged ETF TQQQ
- They worked out pretty well soon after our entry as Daily candle started to print a reversal candle at key level .
- AMD & AMZN Intraday charts shared
- They started to act weak as the day progressed.
- We didn't want to risk more than 2% on both these positions & hence took 1.6% & 1.7% loss in AMZN & TQQQ
- Update sent to members before close ->
- We came into Tuesday, Feb 25th a little skeptical as market wasn't acting the same way it did during every gap down open since Jan
- Update sent to members shortly after open: SPY Went red on the day and in no man's land here below its 50SMA. Let's stay cautious with new trades
- Things didn't look so good as the day progressed & we continued to remain on the sidelines
- SPY & QQQ Chart shared in above post:
- We went into next day with 100% cash as the selloff intensified.
- Update sent to members right after close- >
- Things hardly changed the next day on Wednesday, Feb 26th 2020
- We gapped up at the open & bulls tried to hold the gap but it turned out to be a low volume bounce & we saw a quick flush down again
- We gapped down big the next day & bulls attempted to bounce again. We took 2 starter positions in NFLX & QLD, of course with tight stops as we were in deep oversold territory today.
- SPY Chart as it started to form a nice hammer right at 200SMA
- But this bounce couldn't hold up again & we sold off below 200 SMA as the selloff intensified again.
- We soon were stopped out of both these positions for small losses -3% & -1.2%
- SPY Chart as we went into close on Thursday, Feb 27th 2020
- This close near low of the day was plain ugly & hence we took a small sized position in VXX
- We gapped down big the next day again as panic started to set in
- Update sent to members soon after open: SPY is now clearly below 200SMA. Keep in mind that oscillators can remain oversold just like how they were overbought from Nov 2019 to Jan 2020. No rush to buy this dip with the weekend coming up. Let it play out
- We then started to take profits in our overnight VXX Position
- SPY Chart ->
- SPY Some attempt to stop the bleeding today but we're not out of the woods yet. Lots to prove & close is all that matters. Will sit on the sidelines & watch.
- SPY Chart just before Friday's close
- We then went into next week with 100% cash & decided to wait it out with headline risk over the weekend.
- In Hindsight, it turned out to be a great week for us despite the fastest correct in history!
- These were the trades closed by us during this crazy week
- I know we all hate losses, but it's part of the game. Considering the amount of carnage that happened out there, we were thankful for keeping these losses small
Hope you enjoyed this detailed blogpost. Come join us in the private stream if you're interested - https://www.positive-trends.com/positive-swings.html
See you in the streams!!
See you in the streams!!