IWM - Swing puts again - allow time for a good trade

Sometimes a line chart provides clarity. Here you see a visually simple and compelling reason for a swing put trade. The white trend line begins in Feb-Mar 2020. After price recently went over the line I had a nice swing put trade as price made a rapid fall and came back below the line. Now it is up against the line in a retest, which is a great place to enter puts.

The red and green lines indicate bearish divergence between price and RSI, which has proven to be a useful signal for short term swing trades. The TTM squeeze has given a first red dot; buying momentum is fading.

Finally, in the context of an extended weekly chart, thus far we have an inside bar candle, room to move lower to the 10ema, and RSI which has been over 70 for a long time while stochastic %K has given a bearish warning. I am buying Feb. 19 or later expiry.

Comentário:

This morning IWM is over the white trend line, retesting highs. This is one reason I took swings with enough time for price to move a little higher before it goes lower. Also I only spent enough capital that I can be down a lot and still hold comfortably. If the bearish divergence does not lead to a reversal within the next week I may take a big percent loss, but a small real capital loss - this is an important consideration that new traders often overlook. I may trim position if IWM stays in the 217-218 range, and if indicators change and become more bullish then I will exit.