This week, me and Nick caught a crazy move on the SPX500 that we are currently still in at the time of writing this. This one move has netted us around 1,500 pips in equity. We haven't closed, so this number will not be the same when the trade is over, but this article will go over what we saw, where we thought SPX was going to go, and what we did.
What we saw
Over the past month or so, the jobs market population started showing a much larger growth than previous months as businesses started opening back up and were desperate to hire. People flooded into the labor force looking for jobs. With more people trying to get jobs, the more temporary unemployment there was. So, unemployment claims and unemployment rates went up. But companies were still hiring, just not to the pace of the growing numbers of the job market. What might have been considered an economic slowdown on the surface actually seemed like a sign of growth to us. Our analysis can be referenced here and here.
Where we thought SPX would go
From July 15th to the 19th, SPX continued to sink and eventually crossed under a recent bottom that was supposed to be support. On July 19th, the market had corrected nearly 4% from the highs which seemed like an overreaction to us. And on that same day, price had touched a big indicator for support at the 50 Day moving average. This level was going to determine whether price will fall lower to a bottom in June or come back to test highs.
What we did
We then went to smaller timeframes to look for decent entries. After price had hit its 50 DMA, it bounced, but that didn't necessarily guarantee a full recovery from the lows. Finally, on the 1H chart, we saw a consolidation zone where priced topped out. We were looking for a breakout above this level which did end up working out. When price showed us that it was breaking above, we bought in.
Now we're trailing our play so we don't have to close out at a fixed TP level which is so we can try to maximize our gains. We will either close out in around 1000 pips profit if price comes down from here, or we will continue to trail our stops.
The great thing about this strategy is that when we catch big winners, they really move in our favor. If we're wrong, we get stopped out in the red or at break even. A lot of the time, these big movers are rare and don't usually happen. But when they do, they really pay off.
So, fortunately we were able to catch a good swing on this trade and were aware of the risks involved. Thanks for reading up on this quick rundown of the S&P trade breakdown. Hope you all enjoyed!
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