Deja Vu?

Take a look at the two charts below.  The top is from May – July, the bottom is current.  Look similar, yea I thought so.  To make life as difficult as possible for everyone, I believe we are going to see another head and shoulders pattern form on the $SPY.  The traders who shorted this pattern in July (myself included) were squeezed to death as the dip buyers showed up late but in force.  I was lucky to cover those shorts quickly and with relatively small pain, but those losses are definitely fresh in my mind.  What will the psychology of market participants be this time around if we see the same pattern?  Will you stick to your technical analysis play book and get short on a break of the neckline, or will the losses you incurred by getting short in July scare you away?

My take, don’t let past failure stand in the way of using your chart reading skills effectively.  I think many traders may be hesitant to get short this time around, which is exactly why that strategy will succeed.

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