For a lot of reasons, the market looks extremely toppy here.  I think this is an excellent low-risk point to get short (I'd use the Nasdaq), stopping out on a new local high.  Entry:  ~ 54.45 on the applicable ETF (QQQQ).  Stop: 54.70 (only about 1/2%).  Potential upside:  looking for a move to about 50 (about 8%) in the short term.  If it got there, I'd take some profits and leave a runner to target about 45 (where there'd be one hell of a lot of support).

Update (close of market): With this going enough in the right direction, it can be held (at least) overnight without much increase in initial risk.  The Qs closed at 54.17, putting the trade up about 0.7%, and about 1% away from the inital stop, giving the trade a good buffer against opening gap risk.

Update 2 (next day close of market):  Even though the Qs (miraculously) never hit the stop-loss, this trade would have to be closed out at a tiny loss at the end of business today.  There is almost no overnight gap cushion left -- holding it would change the risk/reward profile dramatically.  This is a perfect example of the type of profile I like to trade, if I'm trading on pure speculation. Small downside, big potential upside.  If I'm right about the potential reward, I can bat less than 10% on this kind of trade and still end up a big net winner over time.

Posted by: Hermit Dave at 08:58 AM | No Comments | Add Comment
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