Saturday, February 22, 2014

IPM Trade Matrix Update - Trade 5 (Part 7) & Trade 6 (Part 1)

Trade Overview
Yesterday's market action triggered a profit signal by the IPM Trade Matrix to sell half of the long positions. As mentioned in the last update, once the sell signal was generated IPM Trade Matrix switched to a more aggressive proprietary trailing stop model. The reason for this close trailing stop was 2 fold:
  1. If market is entering a 3rd wave rally phase, market will not trigger a sell signal based on trailing stop. As a result, we will be able to ride the market higher.
  2. If sell trigger is hit, it would mean that the correction is not over yet and we might see lower prices before new highs.
Since trailing stop was hit yesterday afternoon in SP500 and DJIA, IPM Trade Matrix took profit in half of TNA position. Rule 2 suggests that only 1/2 profit should be taken if proprietary momentum continuation signals are suggesting a continued rally. At this point, we are seeing strong momentum, which suggests that this rally will continue after a brief pause. 

As per IPM Trade Matrix, the next trade will also be a long trade. Therefore, we will use the 2nd half of TNA long position as Trade # 6 and will keep updating trailing stops per IPM Trade Matrix. Worst case stop will be at break-even to ensure 0 loss. New longs will be added if market sets up per IPM Trade Matrix.

IPM Trade Matrix 2014 Trades

TRADE - 1: (Long) = +2.6%
TRADE - 2: (Short) = +9.3%
TRADE - 3: (Long) - Non IPM Trade Matrix trade -0.2%
TRADE - 4: (Short - 1/31/14 to 2/5/14) +7.25% 

TRADE - 5: Long
Long TNA at 70 ==> new TNA basis = 69.94 (added more longs) ==> Exited half at 76.66 (TNA's individual profit target was hit earlier on 2/21) ==> 9.8%

TRADE - 6: Long
Long TNA at 69.94
Longs were initiated on 2/11/14 and 2/13/14 based on IPM Trade Matrix Trigger (IPM & Elliott Wave structure). 

Condition: Bottom within IPM Turn Window  
Trigger: Rally above SP500 = 1789, DJIA = 15790, Russell 2000 = 111.5, Global Dow = 2401
Supporting Indicators: Up trend (8/4 did not complete), Next IPM can be either Top or Bottom

Profit Target 1: 1870
Profit Target 2: 1930

Stop: Break below 1750 (valid till we are within IPM Turn Window)
Trailing Stops: Break below 1802 (SP500) and 15820 (DJIA)
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 0.7% (Entry = 1813, Exit = 1802, Risk = 0.6% )
Risk Reason: There were multiple reasons to be worried. Following reasons have now been taken off the table at least for this trade: 1929 stock market parallel, 8/4 Test to the downside and IPM Bottom window.   

Applicable Rule (There are 7 Rules in the IPM Trade Matrix. Trade 7 Rules will be updated in the next post): 
  1. Do not go long or short without trigger to prevent losses by market moving against you.  
  2. Exit half at profit objective 1. Exit full at profit objective 1 if proprietary momentum continuation signals are not present.
  3. Observe stop-losses to minimize draw-downs

Note: IPM Trade Matrix Trades will be posted in the first half of 2014. This is an experiment to understand and enhance the capabilities of this Matrix.

For Blog updates on Google+ add: Understand Survive Thrive 
For Blog updates on Twitter, add: @survive_thrive
For E-mail updates: 

1 comment:

  1. Added back some longs that were sold on Friday. EW confirmation. Was the trigger. Information at twitter account.



I would love to hear from you! Please leave your comment below!!