The Wagner Daily – Trading $BAC: Shorting Opportunities

The Wagner Daily – January 27, 2022

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MTG Market Timing Model –  SELL

Our timing model was designed to keep our trades in line with the prevailing market trend, not to call tops or catch bottoms in S&P 500 or Nasdaq Composite.

today’s watchlist (potential trade entries):

open positions:

closed positions:

position notes:

• No trades triggered

Commentary:

One of the biggest mistakes a trader can make is over-trading or forcing the issue when there just isn’t much to do. All trading systems at some point go through a period where conditions are not ideal for entries and patience is a must. The earlier we recognize this, the better.

Although broad market averages remain weak, many are extended from the 20-day EMA which makes for less than ideal conditions on the short side. Yes, these indexes could continue to sell off, but new short entries at these levels may require a very short leash should the price action reverse higher.

We must also factor in volatility, which has been very high the past few days.  High volatility makes it tough to find low-risk buy points in general (wild price swings).  

S&P 500 support is 4,300

Nasdaq Composite support is 13,400

There are no new official setups for Thursday.

We are still monitoring energy stocks for pullback or bull flag entries, but nothing so far.

As mentioned earlier this week, intermediate-term trend traders who do not short the market should be in cash waiting for a follow-through day buy signal. For those who do not mind playing the short side, as mentioned above, shorts are in play with a tight stop.

On the short side, $BAC could be in play below the 50-day MA and Wednesday’s low after a bounce into the 50 and 20-day EMAs. The target would be the 200-day MA.  This is not an official setup.

Unofficial Setups – For experienced traders only, no guidance is given for these setups.

• $BAC – sell short below Wednesday’s low with a target of $43.
• $SCHW – sell short below Wednesday’s low for a quick selloff to $86ish.
• $TTWO – sell short below Wednesday’s low with a target around $140.

See you in the chat room,

 Rick

For those new to this report, our share size is pretty conservative with max. size around 10% of equity per trade. We do this because we prefer to trade 10-12 names to keep the report active.  However, if your goal is to maximize returns, taking 18-25% positions is the way to go.   If trading in a non-margin account, this will limit the portfolio to 4-5 positions.  If on margin, then 8-10 positions. Our risk per trade on average is just over 1/2 of 1%. Experienced traders may want to risk 1% to 2% per trade.   For example, a 20% position in a 100k account with a 6% stop loss would result in a $1,200 loss (1.2%). 

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