One of the goals I've set for myself
this year is to improve my edge taking advantage of the short side of
the market. One of the difficulties I've found in shorting has been
vehicle selection. A second problem is that it is counter-intuitive
to what I've been training myself to do, which is to maximize my
potential when the market is conducive to being long. Switching my
frame of mind on a dime creates internal confusion. So, to
accomplish my goal I've opted to simplify the process and use ETFs.
Once I settled on a vehicle selection I
started to think in terms of my time frame. On the long side I'm
primarily a swing trader with a max time frame of 10 days for a
position to prove itself, but on the short side I've been looking at
extending my time frame to compensate for the gyrations and
counter-trend rallies that occur in declining markets.
To resolve this I started looking at a
set-up that marries declining momentum with a signal that a downtrend
is underway. For the momentum period I'm using 2 months, and for a
signal I'm using a GMMA cross. What I'm looking for as an entry
signal is when the momentum turns from positive (as denoted by the
green area at the bottom of the chart) to neutral (yellow) or
negative (red), coupled with a cross over of the GMMA.
Here are a few recent examples of the pattern.
YINN signaled a short opportunity on
02/06
 |
| YINN |
EDC signaled a short opportunity on
02/06
 |
| EDC |
SOXL signaled 04/02
 |
| SOXL |
ERX signaled 04/03
 |
| ERX |
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