However, 1100 points was rather more than expected and the speed at which it happened was startling. A majority of stocks took the nose dive. Even Tesla went south.
Many permabull traders were left scratching their heads. Some who got out were punching the air, while others were crying in their pints.
So 'everybody' wanted to know what happened. Why? It's - as usual - a complicated story and several factors contributed. A big one was some Japanese bloke (who I cannot name, because of the house rules). He pumped call options to a tune of some $50 Billion in this market. Robinhoods followed the frenzy from their homes and mobile apps, going north like the moon was in sight! Some who were following Softbank may have appreciated. I can't go into all of it.
Well, somebody dumped! We can't really know who are these people. But it was a big dump you have to admit. So what does it mean? I can't know for sure so I'll speculate. Note carefully the following is speculation (and note my disclaimers).
1 - Politics is in the backdrop - there is concern among some of the big boys that the US election outcome may not be favourable. I do not wish to get into political sides on this, but geopolitics does affect sentiment. Uncertainty is the big factor.
2 - So whichever side the punters took on, as November 2020 weighed on their minds, I suspect they decided to go for cash.
My speculation may be totally wrong and even I do not rely on it.
To be 100% clear, I have little doubt that Robinhoods (and moms and pops) will attempt to buy the dip - possibly push price back up to 28900. However, the ATR line in a sharp switch is usually meaningful as a guide (on this time frame only).
If price gets back near to 28000, I'll be looking to short with a tight controlled loss ( aka stop-loss). Look, the name of the game is taking the controlled affordable loss. Any trader who scoffs at losses, actually needs to stop trading. Some will probably ask me for details on my probable stop-loss. I can't say from now because I'd need to see what the price action is like. I've already declared on the chart that this post is about trend-following. That is a very different thing to the usual you see on Tradingview. According to robust research, only about 20% of all traders are true trend-followers.
I cannot know to what extent the 1H ATR switch is important at this stage. This is not like in trading (trend continuation), where you see a formation and you know pretty well what your stop-loss and TP are in advance.
Some people have asked me to explain more. I've done all that in several of my videos. Trend followers can be profitable with as low as a 30% win rate. How? It depends heavily on how far trends are followed, whilst minimising losses. Aggregate losses can be large too. Trend-followers can see between 3 and 20 times appreciation depending on time frame.
But returning to the chart. 'We' can't know from now if a 1H trend switch will bear 'fruit'. It may bring losses. That's the name of the game. It is brutal.
Stay safe. Wear a good mask. Wash your hands. Don't attend raves. Sleep well. 😉😄
Disclaimers: This is not advice or encouragement to trade securities. No predictions and no guarantees supplied or implied. Heavy losses can be expected. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, or miss opportunity, kindly sue yourself.