Monkey Bares His Teeth!

Today, I’ll “US Seasonality Stocks“; in the process, I’ll introduce the ‘monkey mind’.

In my last post, I brought your attention to a reliable seasonality pattern, the December Rally. Grimes’ three articles showed how prevalent the pattern is.

So how do we take advantage of it?

In 2018, I believe we do so by asking: will the pattern hold true this year? And if the answer is ‘no’, we have a high profitable shorting opportunity.

For me, the Russell generated a buy signal on November 21. However, the volume and range on the day of the signal (and on subsequent days), left much to be desired. I stayed out.

On Dec 3, the Russell signalled a high. The subsequent down move was on volume and range that suggested we’d see a breach of 1409. The Dec 3 price action together with the Nov 21 structure confirmed that the most likely scenario was: a 13-week bear market swing was in force!

If this view was correct, I expected to see bearish acceptance bars in the buy rejection zone, 1452 to 1426.

I had decided to use the 4-Index System to enter the trade. The entry calls for acceptance below the Initial Balance provided the trade has not been filtered out.  Unfortunately last night, the 5-minute filter did just that!

After the Initial Balance, the Russell broke the Initial Balance Low – but for the filter, a sell signal triggered. My Monkey Mind kicked in:

• “You’re going to miss the trade of a lifetime!”
• “Get in now! Forget the rules!”.

Thanks to ACT, I had prepared for such an eventuality – I stayed out. By trading day’s end, what started like a confirmation of the 13-week bear, turned into a ‘poor’ buyer’s rejection bar. So, the 5-minute filter did its job and saved a loss.

Let me ask you this: how often have your pre-trade plans been upset by your Monkey Mind? Too often?

What are you doing about it?

The post Monkey Bares His Teeth! appeared first on Ray Barros’ Blog for Trading Success.