Over my roughly 20 years of short-term trading, it's become abundantly clear that most traders, even good ones, are often better off not trading immediately following a major news release or economic event. As volatility spikes, we grow anxious about missing out. We have to do something. Anything!
We enter new orders or liquidate existing positions. These trades, very often poorly thought out, are initiated out of a desire to participate. We hear folks on TV mention they're buy XYZ and selling ABC. Our friends on Twitter (TWTR) appear to be positioned correctly and are clearly printing money. Naturally, we feel like we should be doing something similar. We've come down with a full-blown case of Fear Of Missing Out (FOMO).
As many of you prepare to trade the aftermath of the Brexit vote, I would encourage you to consider whether trading within an environment that could be extremely volatile is in your best interest.
Are you able to stare at the randomly oscillating green and red numbers and remain calm? Does seeing the E-Mini S&P 500 futures (Es) jump by five or 10 handles in a matter of minutes (or even seconds!) throw you into a cold sweat? Are you able to adjust your position size and risk metrics to account for a potentially hypervolatile environment?
The bottom line is it's easy to say, "I'll be fine." Or, "I can handle it." It's an entirely different matter to successfully trade within such a dangerous environment. Frankly, there's a small part of me that's happy to know that while I'll be able to read about the Brexit results, I'll be unable to make a trade since I'll be traveling all day.
Moving away from Brexit, I want to remind swing traders of a few items on our watch list.
We've had our eye on Transocean (RIG) for a while, and despite being rejected from the $11.65 to $12 area on Wednesday, the stock still looks promising. The caveat here is I'd be careful getting involved on anything longer than a day time-frame basis until the stock is holding above $12.
Coffee futures, or iPath Bloomberg Coffee Trust (JO) for those without a futures account, haven't been the easiest instrument to track, but they're looking pretty good. The higher time-frame 100-day and 200-day simple moving averages are beginning to turn higher. Coffee looks intriguing on a dip-buying basis.
CF Industries Holdings (CF) is mere pennies from breaking down. If you're long the stock, or have been trading it long on a day time-frame basis, be aware that a close under $27 is bearish.
Facebook (FB) hasn't been a particularly actionable stock to trade on a short-term basis for a while, but as it approaches the 100-day and 200-day SMAs, it may garner a bit more interest. It's been nearly three years since FB traded much beneath its 200-day SMA. So that's where my eyes will be fixated should the stock remain under short-term pressure. (Twitter and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at firstname.lastname@example.org or posted to my Twitter feed @ByrneRWS