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 December
5, 2004 Commentary (weekend edition)-
Today I'm
going to show some ABCD pattern examples in CME. This is one of those stocks
that has been going up since it went public, and seems like it will never stop
(trust me, at some time things will change).
It trades very harmonically, and is
a prime example for the techniques I outline in Kane Trading on: Advanced Fibonacci
Trading Concepts and Kane
Trading on: Trading ABCD Patterns. Of course, I don't do anything
without the 'context' of what is in all the rest of the books, but the basic
potential trade setups are just classics from these two books.
As usual, I
have limited space here in this commentary, so I will just frame out the setups
for the reader. I am going to show a recent setup that I had been waiting for,
and one from just a little while back. Let's start with what I was recently
watching, on a 130-minute chart.
I saw a potential ABCD pattern setting up
right on top of a .382 retracement from the last trend swing up. There was also
a .236 from a previous swing, and some other numbers coming together. Let me
put all this on the chart.
This one was a little unusual in that it
could be viewed that two ABCD's were forming. I put numbers on my setup chart
using both, and an alternate from one overlapped the 1.0 price projection from
the other, right in the potential trade area. (It may also be that this is a
variation of an ABCD, with a 'flat' ABCD in the BC leg, and that's my personal
view here. This is not how I highlighted the chart, though. See if you can set
up the pattern this way, and form a grouping based on that.)
It's too much
detail to cover in here, but I suggest the reader drop down in timeframe and
study this one. It can be choppy, but the areas of focus for me do come
together quite nicely. CME likes to form ABCD's right in the areas I like to
see them form.
Let's see how CME reacted to the pattern.
CME came right off the ABCD and has set
another new all-time high. It's a wild stock, but a lot of traders are playing
it, and it is 'in play'.
Let me go back to October and show a similar setup that
occurred before the one we just looked at.
CME is forming a nice ABCD, again set up to
continue the trend. I threw a time symmetry factor on the chart, too. Notice
the 'scare factor' with the plunge down into the potential trade area. I'll
finish by showing what happened from here.
CME really made a move off that pattern.
Given what I had seen up to the point of the current setup, it is clear why I
was watching closely as this began to come together. I suggest the reader go
back and study CME and look for patterns and 'harmonicity'. For such a wild and
sometimes choppy stock, it is very harmonic.
It never ceases to amaze me how
many simple setups can be found throughout the entire arena of stocks (not to
mention futures and FOREX), if one is just looking for them. Take a look at
INTC on a 60-minute timeframe and see if anything may have tipped off the
potential up thrust. And what may INTC be saying right now? What is the 'context' of what it is saying? I
am always thinking that there is a lot of talking going on out there (by the
stocks), and not a lot of listening (by the traders). I try to listen.
The next
commentary will be the mid-week edition, posted by Wednesday.
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