Mike and I recently did a little back testing of various Chaikin Signals, which we will be talking about in more depth on up coming podcasts. Not to let the cat all the way out of the bag, I've been on the look out for good looking Relative Strength Sell signals to forward test... I think I found one. Full disclosure, this signal happened back on May 27th. I initiated the following paper trade on 6/1.
Here was my set-up.
1.) Relative Strength Sell Signal
2.) Bearish PG
3.) Below a Long-Term Chaikin Trend( 200 Day DEMA - Orange Line)
4.)Negative Relative strength vs SPY
5.) Negative Money Flow
(Why am I looking for these particular criteria? Mike and I will explain in the coming days on the podcast.)
After meeting all the above trade criteria, I initiated a bearish trade (paper money) in $LLY. Given the absence of much volatility in the market, premium is cheap so I'll buy rather than sell ( as much as I hate doing that)
I put on the following Paper Trade - Bear Put Spread.:
BOT +1 VERTICAL LLY 100 15 JUL 16 72.5/70 PUT @.60 ISE
In a nut shell, I think LLY will fall to, or below the 72.5 strike put. In case I'm wrong I reduced the cost of the trade by selling a further out of the money put, in this case the 70 strike put. Of course, by selling the further out of the money put, I cap my losses, but that's fine with me. Max gain on this trade is the difference between the strikes minus the debit paid, or 250 - 60 =190 per contract. I'll look to close this trade for a .85 - .90 profit. Like Steve Miller says, "Take The Money And Run!" I'll keep you posted, and make sure to check out the pod cast in coming days, we have some really cool info to share!
Happy Trading!
AA
1.) Relative Strength Sell Signal
2.) Bearish PG
3.) Below a Long-Term Chaikin Trend( 200 Day DEMA - Orange Line)
4.)Negative Relative strength vs SPY
5.) Negative Money Flow
(Why am I looking for these particular criteria? Mike and I will explain in the coming days on the podcast.)
After meeting all the above trade criteria, I initiated a bearish trade (paper money) in $LLY. Given the absence of much volatility in the market, premium is cheap so I'll buy rather than sell ( as much as I hate doing that)
I put on the following Paper Trade - Bear Put Spread.:
BOT +1 VERTICAL LLY 100 15 JUL 16 72.5/70 PUT @.60 ISE
In a nut shell, I think LLY will fall to, or below the 72.5 strike put. In case I'm wrong I reduced the cost of the trade by selling a further out of the money put, in this case the 70 strike put. Of course, by selling the further out of the money put, I cap my losses, but that's fine with me. Max gain on this trade is the difference between the strikes minus the debit paid, or 250 - 60 =190 per contract. I'll look to close this trade for a .85 - .90 profit. Like Steve Miller says, "Take The Money And Run!" I'll keep you posted, and make sure to check out the pod cast in coming days, we have some really cool info to share!
Happy Trading!
AA
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