VXX trade ideas
VIX GAPS COULD NOT BE EASIER!Here we have another gap, and these really seem to play well on the VIX! Not guaranteed but something to watch. DXY is holding strong as well ;) Not financial advice, DYOR
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Gaps are spaces on a chart that emerge when the price of the financial instrument significantly changes with little or no trading in-between.
Gaps occur unexpectedly as the perceived value of the investment changes, due to underlying fundamental or technical factors.
Gaps are classified as breakaway, exhaustion, common, or continuation, based on when they occur in a price pattern and what they signal.
How to Play the Gaps
There are many ways to take advantage of these gaps, with a few strategies more popular than others. Some traders will buy when fundamental or technical factors favor a gap on the next trading day. For example, they'll buy a stock after hours when a positive earnings report is released, hoping for a gap up on the following trading day. Traders might also buy or sell into highly liquid or illiquid positions at the beginning of a price movement, hoping for a good fill and a continued trend. For example, they may buy a currency when it is gapping up very quickly on low liquidity and there is no significant resistance overhead.
Some traders will fade gaps in the opposite direction once a high or low point has been determined (often through other forms of technical analysis). For example, if a stock gaps up on some speculative report, experienced traders may fade the gap by shorting the stock. Lastly, traders might buy when the price level reaches the prior support after the gap has been filled. An example of this strategy is outlined below.
Here are the key things you will want to remember when trading gaps:
Once a stock has started to fill the gap, it will rarely stop, because there is often no immediate support or resistance.
Exhaustion gaps and continuation gaps predict the price moving in two different directions—be sure you correctly classify the gap you are going to play.
Retail investors are the ones who usually exhibit irrational exuberance; however, institutional investors may play along to help their portfolios, so be careful when using this indicator and wait for the price to start to break before taking a position.
Be sure to watch the volume. High volume should be present in breakaway gaps, while low volume should occur in exhaustion gaps.
VIX long, but how long?VIX price movement is clearly narrowing from a charting technical view, but within the economic fundamentals we have the FED raising rates at an extremely fast pace into a slowdown. Their publicly stated inflation projection was clearly wrong, I highly doubt they will squash inflation with much accuracy given these blunt force tools. For this reason the VIX could go well beyond the 35-40 range if the FED over raised rates. Since Powell was guessing on inflation after injecting more money into the system than ever before(no data to support obviously), it’s fair to assume there is no data to support the current pace and magnitude of raises in this slowing environment. If the current pace is perfect(again no data it would be almost lucky) then the VIX could fall from 35. My base case is the VIX goes over 40 and the FED cuts rates to fix their second mess later this year.
Volatility To Go Lower?We have a gap below that would provide a 3% scalp, most gaps do fill and we are pretty close at this point. IMO, there's a statistically good chance this could wick down or fill after hours but it's a good level to note. I'm thinking if we get there, it would be a good spot to reanalyze for a long position. Not financial advice, DYOR.
Expected Top Level of a potential VIX outbreakConsidering previous top levels of VIX outbreaks we can conclude that it reaches the apex around the 78.6 Fib-level. As the up-coming cycle down leg is the most anticipated since one can remember, I believe expectations to reach all time highs in VIX will be too much speculative - at least at the first attempt in the first quarter of 2023.
VIX looking attractive for a buy LongVIX is tricky to play, if you belive that more turmoil is coming next 6months.
This might be setting up for a good entry.
I would try to get a nice setup only if it hits my target of around 18, then we must identify a good
entry.
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im not the first to say itif were going to hang out here below 20 and play with the idea of a recovery we run the serious risk of entertaining the inevitability of a second major wave in this corona island top/bear triangle. the new regime in volatility is either demanding we crush it, or we let it rip. we cant coil up like this forever. it might be super confusing, but ive laid out contingencies basically orbiting the general area targeting a breakout. i hope its not too dumbed down.
could uvxy for example relive recent exploits, or is it headed for 1:10 unit deletion ($50?) and then back to $5 (-90%?). this is the definition of an inflection point. all i know is theres a lot of units out there... they better start looking under rocks, in streams, up trees and in peoples underpants.
VIX-Low consolidating for upward price moveVIX is consolidating a bit longer at its trough, because so many cycles lining up. Such a phase of prolonged trough happened before as well. Indicators are in a phase to bottom out as well and we can expect an accellerated price movement upward during February/March most likely. The break-out of the green channel may therefore happen faster than anybody expects, but for a positioning it could be wise to wait a little bit longer and watch indicators to signal more strength.
VIX Daily 01/23/2023In this chart of the VIX daily I have changed the final pattern to a Bullish Flagish pattern. I anticipate the VIX to rise also due to macro conditions, and Data Flow, and of course Earnings. Earnings I am back and forth on since Bank reporting..... Thats going to be a big tell IMO.
This pattern morphed since last week when I was calling it a more of a bullish triangle which I pointed out didn't make a lot of sense to me, as the FOMC is doing their darndest to hold back the market, and wqith all the PCE and other data dump this week I expected a rising VIX, not falling.