At the moment, price is fluctuating just above the 12310 to 11620 minor which is relative to the .618 of the recent swing measured from the 10700 low. This is a convenient area for price to present a higher low formation. This is also where the criteria of your trading plan must be considered before taking action. Risk is defined by the 11600 and 10700 lows respectively.
Managing a swing trade in such an environment is tougher than building a position trade in my opinion, but your choices should be determined by your outlook and your plan. Buying upon a break of 13200 while placing a stop at 11600 is not a very attractive choice, even if the upside potential is greater (at least for me).
Keep in mind, the decline from the 20k high may still be in progress. There is actually a .618 that ranges from 8656 to 4953 which is measured from the 560 lows. It is hard to imagine, but it is within reason for price to retest this area before stabilizing and building a renewed effort.
Another thing to consider is this: market conditions dictate what strategy would be more effective in ways that are reasonable in terms of risk. Part of being a skilled investor or trader is recognizing and adjusting to the environment in order to keep risk within the range of your tolerance level.
For me this means adjusting and managing trade size to control risk. If I have to risk 1K+ points on a swing trade as is the case with this market, I am not going to take a full position upon initial entry. Instead, I can begin with a fraction such as 25% or 10% of the initial position and add to it or subtract from it as the market cooperates or not. This flexibility is what allows you to average into a position and keep risk under control without having to use a hard stop right off the bat (stops are not the only way to control risk).
As price cooperates, you can add to your position and manage it from an average price. What I am describing is more of a position trade style, but the wide fluctuations in this market call for that adjustment until intraday ranges consolidate in my opinion. It is the fractional sizing without any margin that makes this strategy effective since it reduces the focus on price precision. If you apply this with margin, you are asking to wipe out your account. If this whole concept is confusing, then do not attempt it at all. Trade markets that are more tame.
At this point, IF price can stabilize, it is more likely to consolidate before running to new highs. The first sign would be a failed low around the 10700 followed by a subsequent higher low and then new break of the 14200 level. If managing a trade within this area, the target expectation is still the 16350 to 17900 area for the short term. These scenarios and levels provide reference points for you to determine how much risk you are comfortable taking in terms of a reasonable reward.
In summary, I am looking to initiate a position trade around the 10700 lows and add upon any extreme price spike. I do not know if price will make it that far, but if it can, I am willing to start small for a long term trade with the intention to sell some at the predetermined targets that are in place now. As I have been writing about, markets that go up in vertical lines are extremely risky and unrealistic. This deep correction is perfectly normal and offers opportunity for those who have the ability to think beyond the hype and the herd mentality. Now is the time to be considering positions and investments, not at 20K.
Comments and questions welcome.