bxr140, I do not understand that of which you write.
That's because you have you shown an unwillingness in this thread to try to understand what TA really is (and is not). That would be fine, if not for your continuing perspective on TA that is the trading equivalent of "Tom Brady Sucks".
TA is not some abstract Nostradamus-like prediction of "I think charts will take a months to recover" followed by a self-back-patting in the form of "its a few months later and charts are improving". It is a methodology wherein a trader that uses various tools to objectively analyze price and volume over time, for the specific purpose of identifying high probability entries and exits and corollary risk/reward. The specific tools used and the manner in which they're weighted/layered are much less important; what matters most is that a trader develop a consistent and statistically relevant set of tools. To wit, I don't find the Awesome Indicator to be relevant in my analysis, but I'm not going to marginalize someone who finds value in it.
TA is not about being right all the time. It is about being methodical and analytical rather than aspirational, such that over a period of time the aggregate risk/reward and wins/losses returns profit. "I think charts are going to take months to recover" is aspirational. Recover from what? How many months? What does "recovery" look like? What do you do when it recovers? Conversely, "I've drawn this triangle and its bounding a consolidation, I'm going to enter on a breakout" is objective and actionable.
FTR, TA actually breaks down
the most in an ATHing situation, like we saw with much of last year. Since the peak earlier this year there have been plenty of TA signals. If one can't see those signals, that does not mean TA doesn't work, that means one is doing TA wrong.
I am willing to bet that there will be a good fade after something that looks like a breakout.
If a trader enters on a breakout and then exits position for profit [based on price analysis] before a "fade", that's literally
the exact point of technical analysis.
If you're looking for entries on B&H positions, TA--and certainly TA as an isolated method of analysis (so, not considering fundamentals, macros, etc.)--is the wrong approach.
As a serious question, how would you propose to position an entry with regards to stop order or maybe even position sizing?
Entry is on confirmation of a signal, typically some layering of TA tools. For instance, if there's a confirmed trend line and then a pro-gap breakout, that's a pretty strong entry signal. Additional layering of tools (in my case, I prefer price-volume accumulation/distribution zones and common moving averages) would increase or decrease the strength of that signal, and therefore would inform my aggression or conservatism with respect to position size and entry/exit.
It is hyper important to have a stop loss on entry in the event price action does not agree with one's probability analysis. In the case of a trend line break, a sensible stop loss would be on the 'bad' side of the trendline. So...if one enters the breakout but price reverses back under the TL, one takes the loss and move on. Or, if one is buying on retrace/confirmation of an accumulation zone, the stop loss might be at the bottom of that zone. Put another way, taking loss is explicitly part of TA.
For a real world example, I bought a few lots of September TSLA calls yesterday around 620, based on the relatively low IV, reasonable strength of the price floor from this ascending consolidation, the tapering consolidation itself, and a hedge that price and IV will run up a bit into earnings. (In other words, my analysis was a combination of TA proper and also fundamental analysis).
My stop was set at dropping out the bottom of the ascending triangle, which from a practical perspective would be around $600 (when I analyze price over time), or ~$20 risk. Obviously I'm up on the positions today (total profit for the lots are at ~40-42%); my stop price is now bumped to $0 loss.
My target price, as abstracted upthread as "high 600's", is in the illustrated price-volume distribution zone between ~660 and 680, or $40+ of underlying reward. If we confirm 660 price target I will raise my stop loss to probably 650 and may also reduce my position size. I'm looking at the top side of the longer term descending triangle which is coming down into that price zone--that layering of TA tools suggests there will be some significant resistance. (Note: it may also present a new entry if we break out of the TL + the zone). So...given today's price action I'm less interested in running this particular position into earnings; there's a good chance I'm going to hit my price target and if that happens this position was a 100% win. No room for FOMO with TA.
For R:R, put the $20 risk and $40+ profit together and you get a 1:2 ratio, which is my minimum number for options (I like 1:3 and prefer 1:4 for shares). I also purposely bought OTM calls ($680) to mitigate CV risk via lower ∆ (than, say, ATM) and also so underlying price movement in my favor would run the contracts up the gamma and Vega 'bubbles' (as opposed to falling down the backside of those bubbles if I bought ATM). I would have bought closer to the money if it was a stronger entry (to maximize my time up high on those bubbles), but I wanted to protect the downside more than maximize the upside.
Because I didn't see price blowing way past $680 this week, I also sold -C680's for this week to create horizontal spreads (obviously I did this as one position, not as a separate ticket from the above +C's), which covered about ~3% of the +C's buy-in price. I'll roll those -C's either Thurs or Fri, likely up into a diagonal spread from the current horizontal. Gotta be careful with calendars because the P/L curve peaks and starts to come back down as underlying moves up past the short...
