Is ‘Sell’ on HSI a ‘Go’ or ‘No-Go’?
This topic deserves a longer discussion to clarify my stand. I feel it deserves attention because Daniel brought to my attention the existence of a head and shoulders pattern on H1 but I was cool to the idea.
I want to say that first of all, I have 2 personas:
- As a trader myself who has been trading more than 15 years. This experience allows me to anticipate certain setups before they happen. So sometimes I do a trade that does not comply with rules but I do them purely by gut instinct.
- As a trainer and the person doing support to all your learning, I have to stick by principles and rules taught in the lesson for consistency and correctness. That means sometimes I have to say no short even when I agree it’s short.
We will come back to this in HSI context shortly.
I tell my 5 y.o. that jaywalking is dangerous, it’s bad and he should not do it. When he is not looking I jaywalk. This is my meaning of 2 personas i.e. wearing two hats. In terms of learning, you folks are by charge so I deal with you wearing by second hat.
Does HSI have merit to short?
Yes. There was a potential head and shoulders setup in H1 at the point of discussion and it is very compelling.
It even entered my pullback zone 1 posted on our discussion on 13 July.
Note however that at the point of discussion between Daniel and I:
- Head and shoulders was not confirmed yet.
- It was still supported by ‘2 YH’.
- Hourly patterns are small and not reliable – something I have always repeated.
- Neckline wasn’t broken yet.
Reasons HSI is not a short – YET
Now my personal stand is I WANT TO SHORT HSI TOO! When I think the setup and timing is right but it is NOT YET.
Here is exhibit #1.
- Month to month trend is down – which is a very good reason to go short.
- Resistance at orange or last month low – very good reason to short too.
- But green is a prominent zone of previous levels too and would be a formidable level to clear.
- I can see points 1 and but where are 3 and 4? What if price consolidates and even goes beyond 2? How?
- Finally week – week is still up and a bearish expansion is missing.
- Who knows? What if the last 5-days action turns out to be a bull flag? After all price shot up from bottom almost straight up!
My stand is this: if HSI just falls to previous low at 22700 this would be a big fat piece of meat and I would be bad trader to miss. But if I want to catch the big one, I am going to wait for the best opportunity and I certainly don’t mind to wait some more for the big confirmation and not to mis-jump because I try to slice it too exactly.
- Yes from ‘2 YH’ until bottom of green, I missed 300 points by not shorting.
- But from bottom of green to 22700 previous is is around 2300 points!
- Finally as a reminder that for consistency sake, we don’t want to do deal with lower time frames too much and we don’t want to be looking at markets over night or early in the morning from 7am for long term sustainability’s sake.
When HSI is ready, it is my opinion that it will show a clear and present setup that would be very compelling. Like a big 1-2-3-4 on daily. At the minimum, I want to see ‘2 YH’ turn into resistance – not support – and I want to see green penetrated decisively. At the moment, it’s Friday we should take it easy. HSI is definitely a short and it’s not going away but we have the luxury to wait. When it does break market will provide ample clues.