|
|
| |
|
 March 28, 2004 Commentary
(weekend edition)-
For this weekend's commentary I am
going to stay with the mini theme I started in the last column. I received some
positive comments about my observations on the mini's behavior, and I decided
to continue with that for one more day. Then I plan to get back to some stock
trades.
Before we start, I'm going to post another chart on the cattle
trade. I'm trying to post that in every commentary so as to be as timely as I
can while there's action in this one. Let's look at the 15-minute
chart.
I marked the potential trade area on the
chart with 'PTA', and deleted off that smaller ABCD that I had previously
highlighted, as we no longer need that. The LC has been going sideways for
three days now. Pretty much every one I have heard is taking off their trade in
here. It does look like it is about to pop up hard in here. But this is only a
15-minute chart, and the traded timeframe is the daily. Take a look at that
chart for some perspective, as well as a weekly chart.
As I
mentioned, I'll keep with my plan and start scaling out on the rise. The LC
first has to prove to me it has reversed in here. I'm not going to just guess
that it looks like it might reverse, and give up my position. I'll keep posting
as things develop in this one.
Let's go now to the ES. Recall that I was
pointing out how the ES seems to move from range trading to trending (usually
strongly) and then back to range trading, over and over. Knowing which 'phase'
it is in has helped my trading quite a bit. This has is no way changed or
detracted from my use of Fibonaccis and patterns in my trading. Instead it
complements such techniques, giving me additional context for making decisions
on the setups. It is this very concept of 'context' that I will cover
extensively in my new book Kane Trading on: Multiples Timeframes and
'Context'.
I'll start with a 15-minute chart of the ES.
Notice how the ES broke out of this range and
started to trend up strongly. Also notice how it started to roll over after the
gap up, and then it gathered strength, took out the high so far for the day,
pulled back, and then thrust out of the range. I could see what was happening a
mile away. Four days in the range and then strong behavior at the top of the
range on a strong gap open day. This type of setup is just not hard to see
coming.
Let's go back to the ES right before it trended down strongly into
this four-day range.
Notice how the ES trended down into the range
I've highlighted on this chart, before breaking down and trending into the
range we have been watching. Many times these ranges sit almost on top of each
other, making 'breakout' trading difficult to impossible. Fortunately, with the
techniques I use, I'm not confined to trading such 'breakout' methods.
The thing I
notice is that the range on the ES for such range trading is commonly 10-15
points. The above range was a bit wider. Hence, as the situation unfolds, I try
to find ranges in the 10-15 point range. Let's look at the last chart again,
this time closer up, with some new areas highlighted.
I broke the range into three separate ranges.
The first range broke before getting very established, only to have the ES come
back into the range for a while. This gave me an idea where to watch below, if
another drop occurred. Notice how range 2 was clearly defined, and about the
same total point span as range 1, just over 10 points. Now look at range 3. It
was very similar to range 1, and in just about the same area.
Once this
last range had 'done its thing', the ES trended down into the range we were
just watching in the last commentary. Now, I'm not saying playing the bounds of
these ranges is what I'm trying to do. What I'm saying is that by knowing the
behavior of the 15-minute (or 13-minute, it doesn't matter) ES chart, and
knowing the approximate size of the range, and the probable length of time it
may trade in that range, I can better plan my Fibonacci/pattern trades.
Don't take my
word for this; try it yourself. If you find it is of no use to you, simply
reject it. I just know that for me this observation has been invaluable to my
trading.
Let's finish up with a trade that I found on Friday. The ES had
broken out of the range, and was trending up. I was watching for potential
setups when an ABCD pullback formed. As all the readers of Kane Trading on: Trading ABCD
Patterns know, this is one of my favorite setups. I had a particularly
tight grouping come together, with a lot of key numbers in the grouping. This
laid out as a particularly good setup for me.
I'll highlight the pattern and put
the grouping on the chart, shown just before the ES hit the potential trade
area .
The ES fell strongly into the grouping, and I
think it was likely that more than a few traders were short in here. Let's take
a look at what happened.
The ES gave me a great signal down on the
1-minute chart, and it started to take off strongly. The high was taken out and
I had a solid trade. The chart reflects all the trade had to give, though, as
they sold the ES hard into the close. Regardless, my management plan let it
ride as far as it would go. My play had me taking some off near this point, and
scaling out on the majority of the trade, piece by piece, on the way down.
Overall, it was a great setup and a solid trade. This is a perfect example of
what I look for day in and day out.
The next commentary will be the mid-week
edition, posted on Wednesday.
P.S. Did you check out the SOX, and set up
the pattern and grouping(s)?
|
|
|
| |
|
|
 NOTE: Reading this page or any page on the Kane
Trading website, or utilizing this website and any material
contained herein in any way, shall constitute an acknowledgement
that you have read, understood and agreed
to all the
disclaimers,
terms & conditions, and
policies of this site.
|
|
|
This website is best viewed with
MSIE 6.0, text size set to medium, and screen resolution set to 1024 by 768.
Copyright © 2003 Kane
Trading. All rights reserved.
|
|
