“They’re just hunting for stops!” says a frustrated trader as a position once in the money is now stopped out.

I have been hearing this a lot on our trading desk. I heard GMan say it this open. I know I was thinking it last night. Definitely heard some guys who sit near me trumpeting this wall street cliche. We are the hunted.

On the open CROX looked broken and heading lower. Oops, stopped out after an out-of-nowhere move above resistance. Yesterday HAS looked like it was failing and heading lower. Oops, reversal and stopped out. We saw plenty of this last week trading SPY.

Ok so now for some thought about how to adapt.

1) When a stock is not moving away from a level convincingly there is today risk of a reversal. We may have to exit more than in the past when we spot unconvincing moves away from prices. I just left a conversation with a trader decreasing his chart views from 15m to 5m. An idea worth consideration.

2) The market maker program. If your stock drips below an important level and you short, but there is a controlled buyer every 5c, then there is risk you will get stopped out above the level. The market maker program will make the spread on where you hit the stock and where you are covering. How do I get a gig like that? Again we need to be covering more into these unconvincing down moves.

3) The trend is not your friend until after the open. Do not fall into the trap of concluding a stock is trending if still 9:45am. The open is for price discovery. The open breeds risk of first move reversals.

4) Crush the clean moves. Did you crush NFLX below support this month? You would be feeling much better about a few frustrating trading days if you banked the NFLX opportunity.

5) Yeah not so much with the bigger stops. They (I am not sure who they is) are gonna just hunt the bigger stops down. Stay true to your stops and if it doesn’t work then it doesn’t work. But my observation of the market is that stops are being hunted and a larger stop will be found.

6) If you are trading only a few stops manually exit your position. I’m finding my auto stops being triggered way too much and then the stock reverting back to its previous pattern. Conspiracy theorists apply here. If you can manage your stops around your exit price. You will stay in more positions by doing so.

7) Price skipping spikes like in CROX today may require reshorting. A price spike on low volume without time as confirmation of a trend break may require reshorting.

I have definitely seen the markets better than of late. But it is Day Two of earnings season. And we will figure things out.

Disclosure relevant position: Short CROX

Bella
One Good Trade