February 21st, 2020

Alright, so we were stopped out of our S&P 500. Let’s take a look at the chart and review our trade and the results.

S&P 500

We entered this trade because the blue (21) EMA was above the brown (55) EMA indicating an uptrend. We were then on the look out for a trigger. It occurred when the red (8) EMA crossed below the 21 and then back above. We placed our trailing stop just below support. You can see from the chart above that the high in price was not matched by a high in the ROC (the label is missing, but the ROC has a red line on it). I ALWAYS treat this divergence as a warning and take action. I don’t exit my trade, but I do tighten my stops. In this case the trailing stop was brought closer to the market price. The price moved up at first yesterday moving my stop up a little before falling back. You can see that the red candle has a long wick (skinny line above or below the candle). It was during that time that my stop was triggered and I am out of the trade.

The result: buy February 5th 3297, stopped out February 20th at 3366 for a gain of 2.09% . ( annualised 47.67% ). I don’t typically keep return records this way, it is a bit misleading, but I want to give you perspective.

Our capital allocation rules allowed us to have a position of 10% of the portfolio ($10,000) and our stop was set to not risk more than $2,000 or 2% of the portfolio.

We made $209 on our trade. Maybe modest, but we use this type of trade to probe for the big move. All of the above are explained more fully in Basic Trading: Book I. You can get a free copy by clicking: https://charlesgoddard2020-f52a.gr8.com.

The rest of our symbols continue in their trends. I will recap all charts on the weekend. Come back and take a look.

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