Tuesday, March 25, 2014

IPM Trade Matrix - Trade 7 (Part 4)

Market Overview

Today's market action was very constructive, as market held its lows. Plus, full long signal was triggered. Therefore, we are fully long based on IPM Trade Matrix's trigger. Now as we approach the end of the IPM turn window, we are looking for the bottom confirmation i.e. market has already bottomed. If market can manage to muster impressive strength over the next couple of days, we will be able to confidently say that the triangle pattern has been completed and the next rally phase had begun. 

Following chart again shows the global stock market index on a longer-term time frame. This chart suggests that the global markets have been tracing out a longer-term triangle since February. Once this triangle is complete, it should result in a market rally. In fact, the rally will be more substantial then originally anticipated. Therefore, we now just have to wait and see how the market react. By the way, emerging markets have rallied impressively over the past two sessions, even in the light of Fed's tapering. This might be another sign of the bottom.

If the market fails to abide by the triangle scenario and makes a new low outside of the IPM Model turn window, we will exit the long trade. However, with so many people now uncertain about market's near-term future, a significant rally is very possible. Today's announcement that Facebook just acquires Oculus (3-D head-ware company), might be the catalyst that sparks a new rally.

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 - 2/11/14 to 2/22/14) = +9.8%
TRADE - 6: (Long - 2/22/14 to 3/07/14) = +11.7%

TRADE - 7: Long
Long TNA at 82.45 ==> 82.85 (added longs on 3/19, 3/20, 3/25) 
More longs will be added when GDOW breaks above critical level 
Trade was initiated on 3/18/14 based on IPM Trade Matrix Trigger. IPM Trade Matrix has been updated and future trades will include a new fail-safe to ensure trade entry near the break-out and reduce uncertainty.    

When: Bottom within IPM Turn Window - Date info e-mailed to subscribers
Next IPM Turn Window: Top / Bottom 
Trigger: SP500 = 1865, DJIA = 16409, GDOW = 2455 (will be a signal for full long)
Supporting Indicators: Up trend based on 8/4 test

Profit Target 1: 1915-1920
Profit Target 2: 1960
TNA target is separate. It might be hit early. If profit target is hit, aggressive trailing stops will be used & we will discuss it on the blog. 

 New low outside of IPM turn window based on Elliott Wave structure. Provisional Stops: SP500= 1840, GDOW = 2425, DJIA = 16125
Trailing Stops: Will be determined next week 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 1.34% (Entry = 1865 , Exit = 1840 , Risk = 1.34% )
Risk Reason: Geo-political uncertainty. Still within IPM Bottom window => Lower levels are possible.

Applicable Rule: 
  1. Sell (1/2) at profit objective 1 to minimize draw-down (aggressive trailing stops at profit objective)
  2. No Trade in opposite direction
  3. Do not go long or short without trigger to prevent losses by market moving against you.  
  4. Observe stop-losses to minimize draw-downs
  5. If stops are hit ==> Wait on the sidelines for new opportunity near IPM Turn window

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.

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