Kane Trading - Education for Serious Traders

					January 22, 2004 Commentary- Today I'm going to show an intraday trade that I found in the bonds, using the ZB electronic contract. I was following the run up on the 60-minute chart quite closely. The ZB had pulled back and then 'tested' an area that I thought might be a potential reversal area, where the uptrend may reassert itself. Let's look at a 60-minute chart, showing just two of the retracements that I had used to determine the potential area of significance, for clarity. Shortly after the bonds opened a pullback started. My thinking was that this might be an opportunity on the lower timeframe to get long. I wanted to see if anything set up that looked good to me. Let's look at the 15-minute chart first, at about the same point that this 60-minute chart is at, to get a feel for how that looked. The bonds are trending up nicely on this timeframe, and I'm thinking 'pullback entry'. I'd like a pullback that has some nice structure to it, completing right at a tight grouping. I don't ask for much, do I? Well, I find that if I watch a varied selection of markets and I'm patient, I can find these kinds of setups. Let's move down to a 5-minute chart and I'll show you what I set up as a potential trade on this one. An ABCD pattern started to form, and a solid, varied grouping came together. This area would also close the gap. I was pretty excited by how this one looked. Before I show how this one played out, let me add something else into the mix. At 10:00 AM eastern the LEI numbers were going to be released. This can move the bonds, so I didn't want to open a play right before the report. I also didn't want to miss out if a big move ensued. I was hoping the timing would work out such that I could get an entry I found acceptable. It turned out like a dream. The ZB hit the grouping just at about report time. I watched as the numbers came out, and waited for my trigger. Right after the numbers came out the ES futures started to drop. This was what I wanted for my play. The ZB started to go up just after that, triggering my entry. The low tick was the exact closing price from the previous day. Seeing the ES futures dropping and the ZB rising, I was pretty confident in this one. I didn't care what the numbers were one bit; all I cared about was how they were reacting to the numbers. Let's see how this one played out. I'm not even going to bother to say what I did here. I'm just repeating the same old thing: "I scaled out all the way up, using my trailing stops/scaled exit plan, as laid out in the book, blah, blah, blah." Generally, it's pretty easy, once you catch a nice play, to maximize it pretty well if you have a detailed plan already laid out in advance. This play was specifically an intraday play for me, using the ZB contract. Another trade is in play, and that's a trade off that area on the 60-minute chart. If one were playing that, this play from today might have been considered as an add-on spot. What I'm doing off the 60-minute/daily timeframe has no affect on the trade that I did today. I use the higher timeframe chart to give me the context to find my opportunities. And here's a thought that might be really hard to comprehend: it's not uncommon for me to be long and short at the same time. How is that? If I'm long an option trade, let's say in the S&P on this run up, does that preclude me from taking a short intraday play in the ES if one sets up? Of course not. Different contexts, different timeframes, and different types of plays. It's something to ponder. I'm standing pat at this time with the FDX play. I was leery about the VTSS earnings, so I closed another 1/2 of a scale out amount on this one. That leaves me with 40% still open. The next commentary will be the weekend edition.


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