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As most of you know, I am a dyed-in-the-wool chartist. I base my decisions on charts and very little else.
There are rare occasions, however, when an investing idea is based on something more than just the chart. Such was the case with Devry, which is one of those for-profit education outfits.
Simply stated, I don't think I've ever seen a group of "customers" as unhappy with a given service as I have with the field of for-profit education. I'm not picking on Devry in particular – – there are many firms out there (ITT Institute, etc.) But as one surveys the landscape of the "graduates" from these "schools" (I am not accidentally using all these quotation marks….) it seems to be a bunch of folks that feel very ripped-off.
Well, I already made that mistake. 1.9% lower. Check out my post from last Tuesday.
But, 1.9% lower really isn’t that far. Especially if you consider all of the bearish indicators that currently reside on a sentiment and technical basis.
I use very few indicators. I am a strong believer in the linear regression of time and price. You know, mean-reversion, bell curves, simple overbought/oversold indicators. Simple, logical, intellectual and more importantly mathematically sound indicators that are the first step towards long-term trading success. Emotions are nonexistent. Time and price determine my parameters.
You may recall that on Wednesday I got stopped out of FII at a really lousy price based on a completely bizarre intraday spike in the stock (I've pointed out where I got stopped out with the red arrow below).
Well, after taking a look at the chart, I decided it still was a good short, so – – in spite of the recent pain – – I re-entered the position. I'm glad I did, because today I covered (where the green arrow is), turning my frown about FII upside-down.
It just goes to show that even when something rattles you, it makes sense to step back, take a breath, and re-assess with as much objectivity as you can muster.
I sent the following tweet out shortly after the highs yesterday morning:
If we are going to see a reversal on SPX soon, odds favor the high this morning. Hit the top SPX rising wedge. Hit support Vix falling wedge.
After the retracement yesterday I think the odds are excellent that a short term high is in, and my retracement targets on SPX would be a test of support in the 1305-10 area, though that would be disappointingly shallow, then a test of rising support from November in the 1270-80, and if that was broken then main support from the October low in the 1250-60 areas. Those last two targets have ten point ranges because they are moving targets, and the exact target would depend on when those trendlines were reached. The lowest risk long entry IMO would be at the test of rising support from the November lows, with a stop below the rising support trendline from the October lows: