Good call. Its following along that line currently

Must be 10x’s the gamblers! The bigger the risk the bigger the rewards!

Very interesting. Thank you for taking the time to explain all that!

I’m waiting for a breakdown of the Benefit of the Doubt trend line on SOXX going back from 4/6 before I jump in on this. It’s being tested from above right now.

I can’t get that 85% figure out of my mind.

I never sold my puts from the first one. Randy convinced me that this was inevitable. I had been occasionally swing trading AMD for the last six months, so I knew how ridiculously overpriced that one was. It’s STILL overpriced. I can’t believe it’s at almost $50 in these conditions. Added NVDA as well. SOXS kicked my butt though. I’m steering clear of that.

Great question. Back in the day, I would typically set stops on many short trades just above a previous reaction high. The problem with that was the fact that everyone else was doing the same thing… then came the algos. They have a knack for sniffing out stop clusters. In fact, it really isn’t hard as most brokerages sell their customer’s order flows (hence, one of the reasons that stock commissions went from expensive to cheap to free over the past couple of decades).

While that doesn’t preclude me from setting a stop above a reaction high anymore, my logic on this particular trade is:
1) If SOXX gets anywhere even close to that previous high, it will likely take it out & thereby, run the cluster of stops set just above, triggering a sharp pop above that level. I’d rather be stopped out just shy than have my buy-stop filled with all the other short buy-stop & natural long-side buy orders if SOXX manages to take out that high.
2) Today’s breakdowns were 110% WHAT I wanted to see as well as WHEN I wanted to see it (i.e.- those wedges & divergences were at the typical point where they “should” break down & getting close to the upper-limits of where they needed to break down, lest the bearish case, divergence, etc… would start to erode.
3) As such, should SOXX manage to get anywhere close to that previous high, that would mean that it had recovered all of today’s post-breakdown drop as well as yesterday’s drop, which would indicate that there are still a lot of buyers (or maybe/mostly just the one BIG buyer, the Fed). Bottom-line, this breakdown looks legit by nearly all accounts & while SOXX, QQQ, and/or SPY could rally back up to backtest the trendlines from below, based on everything that I’ve seen recently, I don’t think they should & if they do, a backtest could come at a level quite a bit above the previous highs.. more that I’d want to ride out short if so.
4) The stop was also set using an R/R of just below 3:1 based on the entry price & distance to the current final target.