Currently a " market neutral - positive potential"  as price fell below a falling 21 day MA as of the close Friday.  Monday looks to bring price back above the 21 MA, so likely a short-lived market-posture.  The bull / bear ratio on the SPY remains decidedly bullish, well above 2.0.  Join us for a deep dive into macro and RS analysis, and see how we use Chaikin Analytics to help set our market posture heading into each week. 

This week we lost half of our positions in $TAN, $ICLN and $GTBC on brief moves of more than 1% below our support levels. Remember, we only use stops on our macro holdings, as they have more of an ability to make big moves that become hard to recover from. 
While we did discover several ETFs in country 1 & 2, we once again went with the best performers which were mostly macro / commodity names. This week we added $USL, $UGA, $IWC.  We did add another tranche of $IWM in our country level 1.  

Everyone's a genius in a bull market, and Chaikin Power Users are no exception! Below are our swing trading results for 2021 so far.  On this most recent market upswing, we took nine bullish trades.  We actually position-sized our stock trades so our $ gains are real paper money net returns.  For options, we just traded one-lots (single contracts), so pay attention to the percentage returns, not the dollar values. Moving forward, we're only going to track single share or single contract gains.  We're trying to establish a win percentage and to narrow the strategy rules over time.

We all know a 100% win rate is not sustainable.  This post is an excuse to commit some trading rules to writing and to brag.

Swing Trading Powered By Chaikin Analytics  (Bullish)

Set Up and Watchlist Criteria

• Market Conditions: market up or market neutral positive potential preferred
• Uptrending industry group an sector
• Underlying stock or ETF checking the usual Chaikin boxes
  • Price rising above uptrending long term Chaikin moving average, Neutral+ rating at a minimum, though prefer Very Bullish/Bullish Power Gauges, along with positive, persistent money flow and relative strength
• OB/OS oscillator oversold
• No earnings next two weeks
• Price less than 10% higher than Chaikin long-term trendline.

Trigger

• Stock makes one of the following technical moves: cross above or bounce at 21 EMA, OB/OS oscillator curls up in oversold, market forecast gives "buy the dip" or intermediate trend confirmation signal, support bounce: close is above high of low candle of pullback, bullish candlestick pattern - engulfing, inside day, island reversal, morning star, hammer or inverted hammer, piercing line, etc.
• Purchases (We are tracking return only, not position sizing or managing portfolio)
  • 1 share 
  • 1 ITM call near 70 delta approximately 2 - 6 months out from expiration 
  • Verticals, covered calls diagonals, butterflies etc require different trading plan
• Risk reward is a critical calculation for swing trading, because we expect more net losing trades resulting from this strategy.  
  • Calculate distance between entry price and 1.5 ATR 21 EMA stop.  That's the the theoretical risk.
  • Calculate the entry price and the projected position of the upper volatility band.  This is the theoretical reward.  
  • We prefer trades with a reward to risk value of grater than 2.
  • Exiting when OBOS oscillator reaches overbought may be a risk to this strategy since it cuts of trades that might otherwise reach the upper volatility band.  However, we don't know if the act of exiting early increases our winning incidence rate.  That's why we're testing. 

Management/Exit for a Loss

• Set alert for stock falling below the 1.5 ATR band below Chaikin short term trendline  Use Keltner Channels set to 1.5 ATR of 21 Day EMA.  This is our line in the sand. Exit if line is crossed.
• Trail kelter channel based stop loss
• Exit if the OB/OS oscillator rolls over before getting to overbought.
• Rating turns bearish.

Management/Exit for a Likely Winner

• Exit if price becomes overbought or touches outer volatility band, whichever happens first.  (Alternative: price becomes overbought and oscillator curls to the downside  OR price touches outer volatility band, whichever comes first.
• Before earnings announcement

Daily Routine: 

• Adjust Keltner Channel based exit, check for earnings announcement and all potential exit criteria
• Log all results.  Consider tracking specific entry and exit criteria so rules can be improved. 

Despite a few days of market weakness, this week there wasn't a whole lot to do with our ETF portfolio.  We're sitting on a little over $110,000 unrealized gains for the year.   Our holdings haven't broken trend, but may be due for a pause.

Update: Thursday produced a $SPY Bull: Bear ratio seen only once before.  With a ratio of 4.28 Bullish stocks to every 1 Bearish stock, the market is screaming bullish. We've only seen a print high than this one time in the 6 years we've been tracking this metric, and we have been suspicious of the prior occasion as  bad data.  We previous put in a high of 4.52 on 6/09/2020, which  quickly fell back below 1.0 See chart below.   Will this extreme ratio also collapse quickly?  Time will tell, we are in uncharted waters here.