|
|
| |
|
 April 11, 2004 Commentary
(weekend edition)-
Well, I have good news. I think I
will be able to get the new book, Kane Trading on: Multiple Timeframes and
'Context', to the printer tomorrow, or at the very least by mid-week. If
all goes well, it should be available within about a week from when I drop it
off. I will begin work on writing a description and updating the books page
right after I drop it off this week.
It has been a long, excruciating process,
mostly because I have been working such long hours to try to get it done. I've
burned myself out completely, but I think you will find it worth it. I don't
think I could be happier than I am with how it has turned out. I just don't see
how a trader could trade Fibonacci patterns and not have this material at hand.
This book is very pattern and Fibonacci intensive.
Although the
title implies that the book has to do with my use of multiple timeframes and my
use of 'context', all this is within a larger scope of patterns and Fibonacci.
The book is a compilation of my best discoveries within the pattern-trading
world. Not only that, it's material that I have never seen elsewhere, and
material that goes against what the 'standard' pattern trader believes and
does.
It is the first book that I have written solely 'by request', and I
feel that it is my best work to date. Keep an eye out here, and on the 'What's New' page for the release
date. As soon as it is released it will be available on the books page. And as
soon as all that happens I'm going to take a little rest, and then finish up
Trade Management. I expect
that will be done some time this summer. I think these last two books will
really round out the series. After that I'm going to be putting my pen away for
a while. I need to get back to intensely focusing on my trading.
Let's move on
to some market action. Today I'm going to focus on the SOX index. I discussed
the SOX at length in my March 31, 2004
commentary. So far, the SOX has really been moving off that original
pattern completion area. In many ways I feel that the best calls I make are in
the semi's.
What I'm going to do today is take a look at a play that I made on
Thursday. I chose this example because it is very 'real world trading' in
nature. It is not well chosen, and it doesn't work out particularly great. But
it is the type of trade that I encounter day after day 'in the trenches'. It is
a profitable trade, but only because the management end of my game is so
heavily emphasized. I think it is a great example of using Fibonacci and
patterns in real life, day-to-day trading.
Let's start with a quick look how
the SOX had been moving since that pattern/grouping I showed on the index
awhile back. This is the one that I was trying to get the readers to set up on
their own, by dropping copious hints, well before the SOX actually hit the
area. I felt that something big was likely to happen in that area.
The SOX has really turned bullish, at least
so far. This has me leaning more heavily on the long side. I have taken some
short trades, but only in the 'context' of that long bias. As I have said, I am
not totally opposed to counter-trend trades, as long as I know that is what I
am doing, and that it leaves me enough room to get a favorable reward/risk
setup.
I have been playing a fair amount of the SMH, the semiconductor
HOLDRs, as I have seen a lot of relative strength building in the semi's. The
lack of leadership in this index was worrying me, but they again reasserted
their role as leaders, and I started to work the HOLDRs.
The day was
going to open on a big gap. I put a few numbers on the chart, to see what was
in the general area where the HOLDRs were going to open.
There was a .786 retracement, two 1.618
external retracements and a 1.128 external retracement. There was not a lot to
speak of as far as patterns. It did look like a good area for the SHM to pull
back a bit, but I wasn't looking for a major reversal. I was looking for what I
call a 'structured pullback', so that I could get long in the 'context' of the
uptrend.
Let's see what shaped up for me.
The SMH started to pull back in the form of
an ABCD pattern. A nice, tight grouping came together. This was what I was
looking for. As an aside, I frequently play the CD leg of these setups as they
are forming, if I feel that I can get an adequate reward/risk scenario. I
mention this now because this was a case where I played the CD leg short, while
waiting for my setup to potentially unfold.
Let's see how
this ABCD pattern setup played out.
That was it, right there. The SMH was 'peaked
out' at this point. In fact, it gave less than the CD leg play into the pattern
completion area. Sometimes that's the way it is in trading. This was by no
means a losing trade. Once the SMH began to turn, I followed my procedure,
worked out over years and years of trading and designed to fit my specific
'Trading Plan', of scaling out on the way down. This play was another 'small
winner'.
Let's follow up with what the SMH did from here. I'll add another
tool onto the chart, too.
The SMH peaked after the point where the last
chart was captured, and then it rolled sideways in a tighter and tighter
'symmetrical triangle'. This triangle was a near picture perfect daytrading
setup, and it caught my eye because I had now seen the pattern 'fail', in the
sense that it hadn't followed through to any great extent. If the triangle
broke down, I wanted to play it. This may have been a 'daytrading' pattern, but
it was in the 'context' of an ABCD pattern play. The triangle broke to the
downside, and I got another 'small winner'.
The other
thing that I found interesting was how the B point of the ABCD pattern bounced
right off that center median line, and the D point went a little through it and
then made its reversal. I also noted how the slope of the downtrend was really
matched with the slope of the median lines, which were calculated just after
the open. The lines really contained price action. I find that the median lines
are a great complement to the Fibonacci and pattern techniques.
So, what did
we get from all this? I hope that you saw how, once again, I could find
patterns and groupings on a daily basis to use for my trading. If I just sit
back and wait, I get all sorts of opportunities. Once I filter my possibilities
with 'context', I have my premise for a trade. And I also hope that you see
that many, if not most, trades are not big winners. My goal is to try to
scratch or obtain small winners while I wait around for those few big winners.
In my experience, there is simply no way to predict which setups will be the
big winners. I have to 'be in' to catch them. This is a difficult or impossible
concept for many people to comprehend. They just keep looking for 'the answer'
to finding high percentage trades.
In the meantime, I try to minimize my losers
while I 'work', so that I can play this game like a professional poker player.
For those that didn't see my poker playing analogy, check out my February 5,
2004 commentary. In the 'real world' of trading, at least as far as I'm
concerned, it's not glamorous. It's a lot of hard work and a lot of trying to
stay with it until I can catch one.
This is not something that you will hear too
often on other websites. You won't be told that you must 'grind out your living
sitting on your calloused backside'. That's all you'll hear at Kane
Trading, though. I try to show it as 'real world' as I can. That's why I always
ask "Are you willing to do the work?"
Lastly, keep an eye on the oil setups that I
posted in the last commentary. Things are really starting to happen, and the
critical time seems near.
The next commentary will be the mid-week edition, posted
on Wednesday.
|
|
|
| |
|
|
 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
© 2004 Kane Trading. All rights reserved.
|
|
