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 December 22, 2003
Commentary-
Wow, did I get quite a response to
yesterday's commentary. I guess the Fibonacci time aspects are quite
interesting to the readers, if my 'e-mail indicator' is accurate at all. I will
continue to integrate time aspects into the future commentary.
Every day I
go to write my commentary and, for the most part, I'm still not sure what I
should write about. Oh, I know the material to write about, the
techniques, and so on. But, what timeframe? And with emphasis on what aspects
of the techniques? Which markets? How much new material, and how much follow
up?
I'm the captain, and I'm not supposed to ask questions. I'm
supposed to know everything (I don't), and direct the ship. But this ship is
for the reader. I already know this stuff. As much as I'm supposed to be
the fearless leader and read everyone's mind, I can't. So I will continue to
mix it up like I have been, assuming that what I'm doing is what the readers'
desire, until I get feedback to ask me to do otherwise.
Now, what
brought all that on? I realized that I wanted to, once again, do an ES 3-minute
chart trade sequence for today's column. I see these sequences almost every
day, and it is my preferred timeframe and trade vehicle. I see the pattern, I
set up the grouping, I manage the trade, and so on. That is what I do with my
time.
What I don't know is, is the repetition on similar (but also unique
in many aspects) trade sequences helping to convey the techniques, or getting
too repetitive? I need input to know what direction to go. Otherwise, you might
see a lot more ES 3-minute charts, get bored, say 'that's all he does', and
stop reading. With that said, we'll move on.
Today was quite a good day for
intraday trading in the minis. Let's look at what I saw after this morning's
ramp up and sell off (does that market action sound all too familiar?).
When the ES set up like this once again, I
set up my grouping. I'll show the grouping and highlight the pattern.
The grouping may not look too tight, but this
chart is a close-up. The grouping is actually just over one tick wide. Let's
see how the ES responded.
The ES hit
the grouping, reversed nicely, and started up. So far, so good. I chose to show
this particular sequence today because 'so far, so good' sometimes only goes
'so far'. We'll move ahead and see what happened next.
The ES has come right back to the top of the grouping.
Here's what I want you to take from this. You are in this trade. What do you
do? If you don't have an answer to this instantly, you shouldn't be in the
trade. Now is not the time to think if you should get out, take more heat, take
some off, etc. Your 'Trading Plan' should have this all sorted out ahead of
time.
I can't tell you what the right answer is here because there isn't
one. Each trader has to come up with his or her own unique and comprehensive
'Trading Plan'. Then it will be very clear what to do here. I will address this
issue in detail in my upcoming book Kane Trading on: Trade Management.
I also address this in quite a bit of detail in Kane Trading on: Trailing
Stops.
Let's move ahead and see what the ES is doing.
If you have a time stop, you may be out of this trade by
now. But look at this. Has the ES violated any of the swing-lows it has formed
since reversing off of the grouping? In fact, each swing-low is higher than the
previous one. There are three tops at the same high of 87 and a quart, but the
bottoms are rising. This is not a weak sign.
What would be
your stop? What is your plan? You have to develop your plan, ahead of time, for
you. For me, I have a saying I like to say to myself: "I can manage my
way out of anything." What I mean is I'd rather be managing a fair trade well
than managing a great trade poorly. I have no problem being in this trade in
here. Let's see how it played out.
The ES ramped up into the close, with one very nice ABCD
along the way. I considered that an add-on spot for this trade, based on
my game plan. By then, it was clear to me how this was playing out.
Also note that we are approaching the 1095-1099 area that I
discussed a few days back. This area will tell me something about what the
market is thinking, and help me decide what side I want to be looking at for my
short-term trades.
Keep in mind this is a holiday shortened
week, and you know how I feel about them. Tomorrow is it for me, and then I'll
play again next Monday (okay, you all know I'll be dabbling, but that's
it!).
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