Thursday, November 19, 2009

More on NYAD / VIXEN

This is a little variation of a setup I previously profiled using the VIX and NYAD to signal trade entries and exits in GE. The setup works for a variety of underlying stocks and/or ETFs, although the large caps and the indices seem to work most consistently.
I like GE because it mimics the overall market so well while at the same time displaying a beta that makes it trade more like a Proshares ultra than a stock. I also like the penny option spreads and the huge open interest across a long option chain given the fact that this is a $16 stock.
What's different about this setup is that instead of looking at parallel GE charts, we looking at the VIX crosses on GE (or your choice) and on the NYAD. You would intuitively think it was important to keep the underlying target a vehicle that's convergent with the major indices and not something like the UUP, which is divergent, but the simple remedy for that problem is to make the VIX the underlying on right chart with the NYAD as the overlay.
These setups can provide great little intraday scalps with the caveat that you always need to have one foot out the door in case things go awry.
There was some ambiguity in the underlying technicals on the NYAD/VIX chart (red circle) which will now prompt me to review and retest those indicators prior to future trades.
Finally, after over 3 years of daily posting on this blog I've decided on a new visual clue to reflect my attitude towards the markets. Gone is Homer's Scream, now replaced by a photo of my humble support team. . . Lopaka, Wilson and Tonto.


magerstein said...

How do you do the scaling so you get GE/VXX crosses?

bzbtrader said...

On the Schwab platform the scaling is automatic. Same thing on Telechart. I've mentioned many times regarding the VIXEN and NYAD crosses, the trick is that the floating scale is dynamic so trades must be executed close to the crosses or the cross points will move forward in time. Other commentors have noted a similar effect on their platforms so it's not unique to Schwab. One way to hedge your bets in this respect is to watch 2 and 5 minute bars in real time and wait for the 5 minute to trigger as a confirmation for the 2 minute. This requires watching multiple charts in real time but offers a superior level of risk management.