It is easy to get lost in day-to-day movements that serve to deflect attention from the big picture, especially when trading options where even small blips against your position can result in double digit losses very quickly. Keep a big picture perspective on the markets, this year is going to be a down year, with bounces up all the way down. Retracement zones provides likely areas where those bounces will end and the main trend down will reassert itself. We have been trading this pattern for 14 years, in both directions. It mostly works, not always, but mostly. The IWM and SPY charts below sport shaded Fibonacci retracement zones. As the index price reaches into the zone we are on alert for a turn back down out of the zone and continuation of the leg down from the prior highs and freshly made Trend Model Sell Signals. Those who have been trading with Blue Line for awhile now are already familiar with this pattern recognition set-up. Upon confirmation of the resumption of the down trend, we go all in on the short side, IWM SPY SPX 240: Pattern recognition trade set-up. Five waves up, followed by a Sell Signal, followed by a Fib retracement. If and when the retracement window is broken to the downside, a high probability trade is set-up for Feb 16th SPY puts.
