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 April 25, 2004 Commentary
(weekend edition)-
I have finally sorted out the
'technical difficulties', at least for now. Tech issues can be so much fun to
deal with. Given that it is now after Monday's trading session, I have decided
to post a trade that I called live in the chat room today, even though this is
the 'weekend' commentary.
I am still working on implementing the 'new format' for
the commentary, but the tech issues have put me a little behind, so I will try
to start that next weekend if I get all the bugs worked out, both in the format
and from the tech side of things.
Today I noticed what I thought was a fairly
significant trendline for the ES on the 13-minute timeframe. It was
particularly significant to me because I thought it was so noticeable to 'Joe
Public'. I fully expected a fake down, followed by a shake, and then a drop. I
had other reasons why I wanted to be on the short side here, and this was
giving me part of a potential setup. Let's look at the 13-minute chart.
When I add this type of thing into my mix,
I'm looking for particular behaviors and setups to come together. Next, I
dropped down to the 3-minute chart to see what that was showing me.
The ES had tried three times at that .447
level and failed (the derivation and use of this key retracement, which I have
never seen used outside of Kane Trading, is in Kane Trading on: Advanced Fibonacci
Trading Concepts). It dropped below the trendline twice, and then
looked like it was setting up for a pullback short entry. I went to the
1-minute chart to look for an entry trigger.
The ES ran up, barely crossed the trendline,
and triggered me. The arrow points to where my entry was initiated. The
interesting thing comes next, though. As I have mentioned, I like to play CD
legs of potential ABCD patterns as they set up, if I like the layout, and I get
a setup for that leg. I frequently play this way in the intraday ES. Let's go
back to the 13-minute chart, and I'll highlight some things.
I showed just the 1.000 price projection to
give the reader a general idea where I was looking. I had put several groupings
on the chart, but I have to leave something for you to do on your own. I also
highlighted a key swing-low point that I expected would either cause a bounce,
or possibly end the downtrend 'prematurely'. Let's see how this wound
up.
The first arrow points to the area of entry.
Notice how the swing-low point level, shown as a horizontal line at 1133.25,
was slightly penetrated, and then a bounce ensued. It then formed a nice ABCD
pattern, set up to continue the downtrend and possibly complete the larger ABCD
pattern. The second arrow highlights this smaller ABCD pattern.
By the time
this second ABCD pattern was unfolding, I was aggressively scaling out of my
trade. I had about 40% left when it rolled over and plunged down for one final
thrust to complete the larger ABCD pattern. Again I scaled out 'on the way up'
with my remaining position.
Given that the ES was in about a 4 point range for
approximately 3 hours before this trade, and about a 9 point range for going on
3 days before this, the amount caught on this trade was more than reasonable to
me, given the way the ES has been trading lately.
Now, did I play the larger ABCD
pattern? No, because of the time of day. If it had set up earlier, I would have
been looking to play it.
As an aside, I have been devoting more and more time to
trading the currencies, and my obsession with the minis is waning (until the
minis catch back on fire). It's hard to devote so much time and energy when I
feel that I can do so much better elsewhere. As I gain more and more experience
with the currencies and my FX trading, I am beginning to realize how well my
techniques work for me in the FX markets.
As you may recall, how my
techniques worked for me in the FX markets was one of the most popular
questions I got when I first launched this website. Now my opinion is that I
feel my techniques work so good in that arena that it's hard to keep up with my
mini, futures, and stock trading. Hopefully, I will be able to get FX charts
permission and post some of my trades at some point.
The next
commentary will be the mid-week edition, posted on Wednesday, barring any more
glitches.
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