We've looked at this pattern before as an opportunity to fade the gap and today's example was picture perfect. With 2 days up at our backs, the Qs gapped up almost a a buck in response to MSFT earnings (ostensibly). The Qs opened a little above R3, while the NYAD opened dead on R2, while the TICK action was devoid of any enthusiasm. The whole thing started to collapse from the open and when there was no buying at the 6:38-6:42 time pivot ( in fact the Qs had already retraced to S2) . . .THIS WAS A GUARANTEED SHORT. I entered an order for 20 ATM puts and ran off to do a few other things, after hearing my message window tone confirming my order. I checked back about an hour later to count my winnings, when I noticed that they had only filled 4 contracts!, so my wind fall kinda turned into a short fall. I refused to fill the order at the current price (11:00) and closed the position in disgust once we got to the lengthy squat bar at 14:30.
My Schwab StreetSmart Pro platform continues to have periodic shutdowns, datafeed halts, and sudden gaps in the charting displays, all of which are critical to my trading. In the face of current market volatility, these platform gliches are not easing my anxiety levels.
This really was a huge down day, considering the Qs started above R3 and almost ended at S2, and they were trying mighty hard to hit that number in the last 10 minutes. The NYAD deteriorated from R2 at the open to a near S1 close. . .another bad sign. I'll look at the longer term implications of today's Q action in tomorrow's weekly update.