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The stock market had a big rally today. This is actually pretty predictable. I have been talking about shorting FAZ since last Thursday night on Twitter. I mentioned that we might have some opportunities to short FAZ for really fat profits (20-30% in a matter of 2-3 days). Let’s take a look at the daily charts of FAZ

As we can see that it approached the previous high on last Thursday and rose from 40-80 in a matter of a few days . Forget about the fundamentals and forget about that we are a in a big recession. Technical analysis says you do not have good set-ups on the long side of FAZ and your risk-reward-ratio would be totally out of proportion if you do.

 My first attempt to short FAZ was on Friday. I had a relatively big position (50k worth). But it did not hit my target. Percentage wise, it was a small winner compared with today’s. Now let’s take a look at my FAS trade today since FAZ was not shortable. I only took one trade and it was up 26%. You do not see this kind of big day trading movers everyday. How on earth did I have the willpower to hold on it? We will come to that part later. Let’s take a look at the entry. A good entry is half a battle.

For frequent readers of my blog, you know I like this kind of entries very much. That is to short double tops and long double bottoms. Of course, I also like wedges, pennants, flags, and cup-and-handles. My entry was after a W bottom formed at 2. That entry was fine. However, if you entered around 3, that would make your entry perfect since that bottom completed the famous header and shoulder pattern if you include the bottom yesterday, which is 1. If you did not include 1, then bottom 3 and bottom 2 formed a double bottom on today’s chart. No matter how you slice it, there were very strong entry signals.

How on earth could I hold onto it for so long?

Normally, I have 6-7% profit targets for day trades. But it was not the case for this one. I aimed for a much bigger profit. I have been talking about big profits in shorting FAZ since last Thursday night. Why would I barge for a 6-7% gain? How did I cope with my emotions? LOL, I went to nap after I moved my stop loss to break even and when I woke up. Voilà! it was up big nice. It never had meaningful retraces, which made it easy to hold onto it. Had it gone down, I would have been stopped out break-even. That is my stop loss would do its job. It was also attributed to my small position (around 13k). I would have made 10k if my FAS position today was worth 50k like the FAZ trade I took last Friday. But I might not have been able to control my emotions well.

Here is the summary.

1: followed my plan
2: total conviction. When a trade is in motion, I never listen to anyone or anything including any news.
3: a small position.

My only swing long SOHU is doing great. Here is my portfolio and my real time stocktwits