Wednesday, January 5, 2011

Bond Trading Range Still Working

After covering my short trade at my target zone on Monday, I was a bit late to short again at the upper end of resistance near 122'00 just a few hours later. I ended up shorting again anyway at 121'20. But I was a bit uncomfortable with this for two reasons. The first is that I was upset with myself for missing my desired entry point, the second was this was beginning to feel too easy. I was afraid I was going back to the well too often and was about to get bit. Shorting bonds the last two months has been a great ride. So I decided to shorten my exit point a bit and stay small with only one contract because I wanted to see how the charts shake out the next few days.

 My theory of being in a consolidation range has been accurate the last few weeks, but today was the day we should find out if the down trending channel was still intact. Very interesting to see bonds rally all through the electronic session up to resistance only to see a large seller unload once the pits open and there is people to suck up volume. Two hours later somebody unloaded again. In the last two days I've gone from being uncomfortable being short to worried that future entry points might not exist as bonds are down 2 full points today. Such is the life of a discretionary trader. I'm still short (2) 123 strike calls but those are possibly a few minutes away from being closed out early at my target price of 0'14.

Three-Day chart showing last two trades within the consolidation range

Recent consolidation range from the lows on 12/15

3-month down trending channel with consolidation range

1 comment: