Hi Folks!
I just wanted to give an update on how the Art of Trading has been navigating recent market volatility and what we're trying to accomplish in terms of positioning and risk management.
Last week I created a post titled “The State of the Market”. Basically, we took a look at how the market has shaped up over the past 8 weeks, we covered $NYMO and $NAMO in its current state and finished it off with the potential next scenario for the market. Last week these ideas were confirmed that the market might want to retest lows made back in June.
This is what I wrote in that post:
So what could be next for the markets?
The current trend remains down. One scenario that could play out is the market could potentially continue to zig-zag its way down and retest June Lows. This might not necessarily be a bad thing because it could give us more clues as to whether the market wants to continue lower or try to base around the price levels established earlier this year. Only time will tell.
So, how did the markets play out last week and how did AoT navigate these conditions?
The markets made a very close attempt at retesting lows made in Mid June. Not quite a retest but close. Here’s how it played out for $NASDAQ:
The market held in range on both Monday and Tuesday, then we had FED Day on Wednesday. The market was quite strong into the announcement of another 75 BPS rate hike (Which the market was anticipating) but by 3PM the market moved sharply lower and closed on lows for the day. This set the course for the market for the remainder of the week.
Earlier in the week on Monday afternoon Art of Trading members were alerted $SPWR long. $SPWR was a bullish flag setup that made our weekly “Stocks to Watchlist”. This watchlist is sent to Art of Trading members each Sunday evening so they can plan and stay up to date with what I’m watching each week. Sometimes these setups are made into official alerts, just like this one here!
Our short-term trading portfolio was flat into this alert so we had some flexibility in the way in which we navigated the market.
This is a key point here: in highly volatile environments its best to keep only 1 or 2 trades on at a time and not 3, 4 or even 5 or more trades on at a time. Things can quickly get out of control and emotions can run high. This is something Art of Trading has been doing in this environment. Less is more and only 1 or 2 trades at the most on at a time!
Unfortunately, after the market broke down during the FED update on Wednesday our position was stopped out for a small loss.
Here was the tweet alerting members of the stop out:
After the high-volume close Wednesday after the big fed day the Art of Trading short term trading portfolio was once again flat.
I went back to my charts and noticed a potential bullish divergence in the $NYMO/ $NAMO charts compared to the $NASDAQ. Basically $NYMO and $NAMO were making a higher low where as $NASDAQ was making a potential lower low. Usually when this happens it sets the market up for a big bounce.
This divergence ended up failing early on in the day Thursday so I knew now that the market had another high likelihood of closing on lows again for the day.
I went back to my Stocks to Watchlist and looked at the short setups I had shown Art of Trading members I would be watching for the week. $AFRM was at the top of the list for a A+++ short setup.
I alerted $AFRM short:
I continued to hold $AFRM short through Friday and it remains our only active position in the Art of Trading short term trading portfolio.
Keeping only 1 or 2 trades on at a time during turbulent market conditions can keep you flexible for your next potential move and your emotions in check. It’s a lot easier to manage a single position than it is 3, 4 or 5 difficult market conditions such as these. Art of Trading will continue to navigate the market on our toes until conditions change!
What has Art of Trading accomplished for 2022 so far?
I hope you found this review helpful!
Cheers and Happy Trading!
Art of Trading
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