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Daily Portfolio Summary 1/5/2012

The model portfolio performed well today.  At 11:03am our sugar futures sell stop triggered getting us short from 24.10.  Sugar spent the next 45 minutes going sideways and then took a steep dive to hit its low of the day within an hour of our entry.  Sugar closed the day at 23.17 after a sideways consolidation throughout the afternoon.  That’s a 3.86% move on the day.  The impressive movement is exactly what we would expect to support our trade thesis which is targeting the 18 level or lower.   However, it isn’t yet enough to lower the stop for our position.

The afternoon consolidation in sugar has a distinct triangular appearance consistent with a fourth wave triangle.  This suggests the possibility of one more leg down before an upward retracement.   One strategy would be to try and exit on this first drop and then try to re-enter after a bounce.  We will not be doing this.   Timing and pattern identification can be difficult, especially in sugar.   So the model portfolio will stay short with the current stop.  Once we can identify a corrective bounce that is complete, we will likely use its top as a new place to set our stops.  More on this as trade continues in sugar.

The portfolio also took a short position in IBM puts today.  Perhaps this move jumped the gun a bit and a better entry could have been achieved later in the day.   We’ve followed our discipline in entering the trade, now we just have to see if it will go in our direction.

The Managematics Model Portfolio is a fictitious portfolio managed to demonstrate trading techniques which may be used to trade a speculative account. It is for education purposes only. Nothing related to the portfolio should be interpreted as a recommendation to buy or sell any security and the general techniques employed may not be suitable for every individual. Past performance of these techniques or this portfolio may not be representative of future results. The results shown may vary from actual, live trading results which are subject to live market conditions.

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