April of 2013 June14 nasdaq futures were on their heels at 2716. Fast forward through a 1,017 pt rally over 12 months. All the while every one saying “no, “don’t buy it” no, “its over done” no, “its smoke and mirrors”. If you listened to those bears now, I guess after a 4 session 214 point correction, they are finally proven “right”? if you were short this market all last year trying to sell the top that was the wrong move. So after a 4 day correction, be careful jumping in and getting short, only to set yourself up for getting stopped out on a reflex rally.
Look at the Chart below Bears have to be looking at 3347 or 3106. 3106 would take back 1/2 of the 12 month rally. I guess that’s a possibility. But for those bears who were short 1,000 points, is a 500 point pull back to cover half their losses really smart?
Go ahead and sell it, but you better have a buy stop above in case we spin higher and catch all the shorts the wrong way. Looking at this chart, we could drop all the way to 3106 and still be healthy. If we get to that level, that will be a great buying opportunity.
The best way to play this is with cheap put options which define and limit your risk. With HFT out there stop- hunting with their algorithms, you are looking at a great chance you’ll be stopped out, just to watch the market roll over after you’re stopped out. The only way to avoid this is to trade very small and have very wide stops.
Other wise, go long put options and spend 1500 or 3000 on a downside play.
CER