Our View – REVENGE Trading
I’m sure at some point every trader has revenge traded. What does that mean?
It means that after feeling cheated by the market, traders begin to abandon their rules and parameters, trading willy-nilly on random flyers looking to make back what they lost.
The trading rules are out the window and the “gambler” side of you has come out, looking to claw your way back to even. But this only seems to make things worse — turning a small loss into a big one. At its worst, revenge trading is simply just trading to trade for no rhyme or reason.
When the ES swings as it has in 2022, it’s really important to have a trading plan. I think that’s where the Opening Print really has value.
From my time in the S&P pit, I knew many traders and they all had one thing in mind when they went in there: To crush it. But in those days, we didn’t have the ES moving at 4 or points (or more) in seconds. Traders need to respect this volatility and they need to respect the damage that a losing trade can do if it’s running in the wrong direction.
Problem: Revenge Trading. Solution→
If the trade doesn’t work, exit the trade and look for another setup and do the same thing. If there’s nothing there, leave it alone! Go wash the car or walk the dog or work out or read a book. Do something, but don’t trade if your setups aren’t there.
Don’t let the losses run — the ranges are just too big and unforgiving right now.
Traders who are struggling in this tape need to smarten up — adapt or die. If you are a revenge trader, it’s more than likely you will drain your account. If that’s you, take a few days off and come back trading 1 and 2 lots for a few days to prove you can still do it. Or trade micros just to get the feel back.
Our Lean
It doesn’t happen every time, but when the ES sells off hard late in the day it has a tendency to rally on Globex. Obviously, earnings from Apple and Amazon really sway the end result.
Today is the last trading day of April and the main question is, can the ES rally again after a 150+ point rally in two days? I think it can, but if you look at Wednesday and Thursday, they both gapped higher and sold off 50 to 70 points, and then rallied hard and puked on the close. How much buying is left in the tank?
I think we can bounce, but this is a two-way trade.
Monday, the first trading day of May has the ES up 17 of the last 24 occasions. And next Friday (ahead of Mothers Day), has the Dow up 19 of the last 27. I don’t think we are looking at another 6 days of going up, but there could be another push higher next week.
I know the Lean may seem off sometimes, but please understand that this tape is not easy and it’s impossible to catch every major rip and dip — especially forecasting it hours ahead of time. If we catch just one piece of the move, it can be a very profitable ride. The last two days have had setups to sell the open and they have been very profitable rides.
Daily Recap
The View and Lean were long today, so we’re keeping the recap short. The ES opened at ~4230, climbed to 4238, and took out Wednesday’s high by less than two points, then reversed and fell 55 points. We love that type of reversal — 2 points of risk and a huge reward.
The ES bottomed at 4182.50 shortly after 10:30, as the “one hour low” took hold and it reversed. It popped 37.50 points to 4220 at 11:10, consolidated in a wide but defined 20-point range, then broke out over 4220 at 12:10. From there, the ES rallied in thirteen out of the next fifteen 15-minute windows. The two “red windows” were a loss of 2 points and 0.75 points, respectively.
The ES topped at 4303.50 at 3:20, pulled back 33 handles while the MIM showed $1.5 billion for sale, and closed the 4:00 session at 4285, up about 95 points on the day. After 4 pm, the ES fell 27 points and settled at 4258 after Apple and Amazon reported earnings.
In terms of the ES’s overall tone, it acted OK after the morning dip. In terms of the ES’s overall trade, volume was high for an up day, at 1.747 million contracts traded.
- Total Range: 121 points
- H: 4303.50
- L: 4182.50
Technical Edge
- NYSE Breadth: 79.2% Upside Volume
- NASDAQ Breadth: 71.8% Downside Volume
Game Plan
In light of the volatility right now, I’m super pleased with how the S&P has traded the last few days. Traders have been able to pull a total of 100+ points out of the ES from the opening fade over the last two days. The short SPY trade has been killer in those two days too.
The TLT trade is now set with a breakeven stop, as we said to book some gains on yesterday’s gap down.
Despite a faster tape, we have been moving slower and that’s really important right now.
S&P 500
Today’s tough. Not only are we navigating AAPL and AMZN’s impact on the tape, the ES is 70 handles off Thursday’s high, but up 100 handles off this week’s low. We’re kind of in no man’s land right now until the market decides where it wants to go.
On the downside, let’s see if the ES retests 4220 — yesterday’s intraday breakout spot and the 50% retracement of the move off the low. Below that, 4200 is in play, which is the 61.8% retrace of the move and a notable intraday level the last few days.
A dip/reversal off these levels could be a buying opportunity. A break lower puts 4185 in play, then 4150.
On the upside, watch 4280 to 4285. That’s the Globex high and yesterday’s close. If we rally there and fail, it’s a potential low-risk short. If we power higher (which is actually the setup I prefer), ~4300 looms large. That’s yesterday’s high, the declining 10-day and this week’s high, and combined, could act as resistance.
- AMZN and AAPL will be key to the upside. If they can’t rally, they will act as anchors on the market.
Individual Stock Trades — PG, PANW, MCK and DOW
- PG and PANW are longer term setups on the weekly.
- MCK and DOW are setups for today that will need the market to cooperate.
PG
Defensive stocks have been doing well lately. PG is probably a “no trade” today, but keep this one on your radar for next week as it’s setting up with an inside week just below $165 resistance.
PANW
Similar deal in PANW. Inside week thus far as it consolidates above the 50-day but under $600 resistance.
If the market crumbles and this goes weekly down, perhaps we see $550. If it goes weekly-up (my preference), then PANW could see $620 to $630 as a potential trim zone.
A rebound in tech could bode well for this name, which has had a lot of relative strength.
MCK
We have hit this one up a few times for a nice profit. Now let’s see if it can go daily-up over $321.80 – $322. Important: It needs more than just a wick above this area, it needs to clear it and hold above it!!
If it does, $326 to $327 is our first trim spot, followed by $335.
If it triggers, our risk is yesterday’s low. Aggressive bulls can use $311.
DOW
Post-earnings flyer. Daily-up over $68.10 is our trigger. That puts $69.50 to $70 in play first, then $71.50.
If it triggers, our risk is yesterday’s low.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Numbered are the ones I’m watching most closely. Bold are the trades with recent updates.
A huge number of our B/E stops were hit last week, leaving us with virtually no trades left on the books. Some runners may be in play with WMT and TGT.
- TLT — Trim spot hit, down to ½ or ⅔ position and B/E stop → Looking for $119.50 to $120 as next trim zone.
- WMT — Trim at $158 → B/E Stop.
Relative strength leaders (List is cleaned up and shorter!) →
- AR
- PEP
- KO
- MCK
- BMY
- JNJ
- DLTR
- DOW
- VRTX
- XLP — Consumer Staples
- PG
- COST
- MAR
- PANW
Economic Calendar
As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
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