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 October
27, 2004 Commentary (mid-week edition)-
Today I had
planned to show a whole series of beautiful ABCD patterns that have been
cropping up lately on the 1 and 3-minute intraday Russell mini. It seems like I
would hardly finish up with one, when another would show up. I like to watch
all the minis: the ES, the NQ, the DOW and the Russell. This way, I can find
the setups that look the best to me, and choose the best behaving issue at that
time.
I can also utilize the immediate relative strength (or weakness) of
the issues, for example taking short setups in the weakest one, and taking long
setups in the strongest. For today, though, I found some other things that I
wanted to show, so I will let those examples I had lined up disappear into
obscurity, and I'll just show one example in the Russell from right before
today's close.
Before we begin, that was on heck of an asset allocation swap on
that API inventory report this morning, huh? Look at charts for gold, bonds,
the dollar, and the indices. They moved some money around today. I saw nothing
but the long side today. The trading wasn't all that great for my style once
that ramp was done, but I did lean on the long side, and there were some small
ABCD patterns to trade, so it wasn't too bad.
Let's go back a few days first, and
let me show something in the INDU. This will fall into the 'who would have
guessed a bounce was coming' category. I'll go to a weekly chart first, to show
where one of my lines is coming from.
I put this median line and parallels on my
chart a long time ago. It did a good job showing where the INDU might slow down
with the run up. As the lower line was approached, I kept a watch for a
potential reversal or bounce. I'll drop down to a daily timeframe now.
I drew in two trendlines that I thought best
represented the price action. The upsloping line near the current action is the
lower median line parallel from the weekly chart. On another software program
this line displayed a lot closer to the reversal point than on this chart, I
think because that allowed me to calculate the line on a weekly chart, and
retain the same setup when switching to a daily timeframe.
In this case
I recalculated the lines on the daily chart. I'm actually not sure if switching
timeframes and retaining the lines may 'mess up' the calculations. Regardless,
the area where things might have started to pick up was clear, and the INDU
responded strongly. I suggest the reader add some Fibonacci work onto this
chart, and see what comes up. It is rather interesting.
Let's move on
to something I saw in the Russell mini today. I have been seeing this a lot
lately with all the minis. I'll show a 1-minute chart .
The ER (or ER2, or MR, depending on your
quote vendor) formed a nice little ABCD pattern, set up to continue the
uptrend. I'll let you put your own numbers on the chart. This was typical for
what I have been seeing over and over. It is my one of my favorite ways to
trade right now. Let's see what the Russell did from here.
There was a nice reaction off the pattern,
with plenty of profit potential. My desire to be leaning on the long side today
made this the type of setup I just sat and watched for. The key for me is in
having the proper 'context' so I know which ones to trade.
In the
original commentary I had planned I was going to show three of these that came
up in a row on the Russell a little while ago. I called these live in the chat
room. The first two I said met my criteria, and they reacted nicely. The third
one I said had the wrong 'context' and the behavior wasn't right, so I was
going to pass. That last setup blew the pattern right out. I think these can be
great little setups, but only with the proper 'context'. How I do that is all
laid out in the books.
I'll finish with an update on the QLGC play, shown on a
60-minute chart.
QLGC is following through nicely here, and I
have a solid winner so far with this one. The stop is moving up, and things are
going very well at this point. Now I just ride this, implementing my management
plan as things unfold.
Speaking of management plans there is so much detail in
the new book Trade Management
as to how I do this, I just can't believe it. I didn't realize this until I
started managing after the book was done, with an eye now trained to see what I
am doing, and not just 'do it'. I think this book is really going to help a lot
of traders out, and it really completes the series, filling in the gaps that
were there.
I do have it fully completed, but the printer, who has been closed
due to a family emergency, did not reopen today as scheduled. I will try again
tomorrow, and hopefully get that dropped off. This is why I am not going to
post the updated books page, or take any orders, until I have the copies in
hand. It should be very soon, though.
I am also going to introduce something
interesting at that time that I think will really help out the serious
students. I'll explain more in the 'What's New' section, which I
hope to be updating soon. I also plan to finally get the book excerpts working.
I figured out how to do that a while back, and as soon as I started working on
it one of the programs I used must have gotten corrupted, because it stopped
working. I was unable to get it to work at all on another computer, either. I
will resolve this one way or the other, and finally get those done, hopefully
in the next month, as there is a lot of them. I'll keep everyone posted on the
'What's New' page.
The next
commentary will be the weekend edition, posted by Sunday night.
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