August 17, 2017

Will Holiday and Short-term Oversold Tendencies Prevail?

I purchased a few QQQQ and IWM calls today. Here are the trades:

QQQQ and IWM Trades

The gap lower this morning pushed the Nasdaq 100 (QQQQ) into a short-term oversold extreme. As I write this the RSI (2) for QQQQ has pushed to 0.12 which probability screams that a bounce is near. Combine the aforementioned with an unclosed gap and positive seasonal tendencies and you can see how Mr. Probability could side with the bulls over the short-term (1-5 days).

The trading days surrounding July 4th are historically bullish. The two trading days before and the trading days after are all bullish with three of the five days having a % of time positive in the 70% range. Of course, I typically never trade based on which way the seasonal winds are blowing. However, when the winds are blowing in my direction with a few other key indicators that I favor then I have to take notice. It can give me that extra edge in probability which is always seek as a high-probability mean-reversion trader.

If all goes well, I hope to be back with a post later this evening. If not, I might just post some thoughts to the comments section of this post. Lately, this seems to be more effective and hopefully, it will encourage all of you to to tell us all what you are trading/thinking. All comments welcome.