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 May 29,
2005 Commentary (weekend edition)-
I'll cover
some orders of business here, and then we'll get to some heavy-duty chartwork.
As I mentioned, I'll be going on my annual 'vacation' probably by the end of
next week (June 3rd). I will be able to ship out any book orders that I get by
Tuesday morning May 31st. If you plan to order before I take my break, please
do so by then, so I can get them out for you. If I get any orders on Wednesday
or early Thursday, before I officially shut my computer off, I may be able to
have an 'associate' drop them off for me for shipment, but I can't promise it.
Once I power down my screens on Thursday I won't be checking my e-mail again
until I 'return' on Sunday June 19th, or it won't be a break for me.
Right now I
am planning on doing a non-charting commentary for next weekend, and posting it
Thursday for the upcoming weekend. The next commentary will then either be the
weekend edition two weeks later (June 19th), which may not be posted until a
little bit after the weekend, or the following weekend's edition. Start
checking back on June 19th and I'll do the best that I can to get one up for
that weekend. This way I'll only 'miss' one commentary. Talk about not ever
really taking a break. You know how I am. I will also post the information on
the What's New page, with
a link on next weekend's commentary page. With all that said, let's get to some
charts.
Today I'll post some work from the members' area this week.
Like you didn't already know that was coming. I'm doing a big post today to
'make up' for taking off for my 'vacation' and not doing any commentary for a
week or two. Here we go. I think this is top-flight analysis, and frames out
the type of work I do every day for my trading. Keep in mind this is a
framework, not the entire workup.
"Today I want to look at something very
interesting. I am watching the commodities very closely, as you all know. So
today I noticed a very interesting change of character. For example, wheat
finished up 20 3/4! You read that right. Corn, up 11 1/4. Those are big
numbers. Let me start with corn, and then we'll look at wheat.
Corn formed an interesting structure, one
that would have many pattern traders waiting quite bit below. I have my own
setups and ideas, so I watch different areas than most. Many times when I see
an .886 retracement at what looks to be a B point, I keep a close eye on the
1.128 external retracement area. And you know I'm always watching the 1.272
area closely as it is.
Given how beat down corn is, and how I'm just not seeing
a lot more downside, that's the area I am looking at. I noticed that the .786
alternate ABCD was hitting in the area I wanted to watch, and it was just below
the 1.128 external retracement. I also had the 1.618 BC external retracement
there. I can see a few 'old school' pattern traders saying 'But Jim, sure, that
could be the area, but there may also be nothing there. How do you know that is
going to be it?' I'm glad that got brought up. The answer is that I don't. On
the other hand, I have many things pointing me right to that exact
spot.
Take a look at that trendline I added on. Points me right there.
And I have mentioned time and again how I like those 1.272 external
retracements. This time we have one set up in a manner I show the mentor
students repeatedly. Many times there is one last thrust down, and it does this
at a 1.272 external retracement. That other number in there is the 1.272
external retracement for that final small reaction off that larger 1.128
external retracement. And finally, I watch for price action and see what it
tells me. In this case a textbook 'Pattern Trade Gap Entry Technique'.
Let's look at
this on the 45-minute chart.
Take a look at that trendline now, and the
numbers that fell in there. Set up a 15-minute chart and draw in the Pattern
Trade Entry Technique trendline and see how it did the gap, the slight
pullback, and then the trigger (for those that are like me, and won't fade an
entry). This is my best gap entry strategy by far, and one I know I need to
write up, at least for the members.
There was a lot more than this, though. As
this was happening, recall where wheat was. I showed that 1.272 external
retracement area in here. Let's look at that, close up on the 45-minute
chart.
Wheat hits the 1.272 external retracement the
day after corn hit its area and started tracking sideways right on it. Just
look at that trendline! If you do some ML work you will see the trendline
actually follows a ML lower // that I had for this. Wheat smoothly reverses,
and gives me a slew of entry triggers. Then it is gracious enough to pull back
to that .618 retracement I showed, before rocketing off. I can't ask for more
than this. Now, maybe this is all the move I get. I'm in management mode, and I
see what happens. I just look for setups, follow my 'Trading Plan', and let it
all unfold."
I then followed with this:
"I'll start today by continuing the grain
theme. This time I'll show the beans.
Recall I mentioned yesterday how I was
looking at many things as corn and wheat came together. I left this one off to
give everyone a chance to do the obvious (boy, I hope this was obvious) and say
'So, what were the beans looking like when those corn and wheat setups came
together?' If you said that then you surely already did the work I am showing
now. Here's the sketch so you can see if you saw it as I did.
The beans
formed an awesome ABCD pattern right on traditional support. I showed the 1.000
price projection and the 1.272 external retracement. I also showed the //'s for
a modified Schiff ML set (even though they may not look it, those lines
are parallel). So it turns out beans were setting up at the same time as
corn and wheat. This is something that I watch for, and weigh heavily into any
setups I am considering.
I feel each setup supports the strength of the other
potential setups. At times I play off setups in other related issues even
without as distinct of a setup in that specific issue, as long as I have
something to work with, and a solid entry trigger. Many times I play stocks off
the sector index, even if the specific stock doesn't have the same setup. Of
course, it must have something, and have the same overall 'look' to it.
Let's look at
this down on a 15-minute chart.
Just look at how the key fib area hit the
line, and the price moved right there and reversed. This is one way I use the
lines to show not only support for a price grouping, but also to give me a time
factor. No, they don't all 'work' this well, but the synergies are really
tremendous for me. Looking at this chart I can see a slew of entry triggers
that are right out of Entry Techniques. This one was about as good as it
gets for my methodology.
Let's go back to the daily chart, with one more thing
added on.
I added a standard ML set on the chart. Look
at where the beans are right now. Notice, too, how the action did that
oscillation around the ML as it worked its way up, as I have shown many times
before in here. It should be clear how I can use this set in my management
plan. I actually have an upper reaction line and division lines on my working
charts, and some fib work. Now I see what happens."
As we now
see, the beans had more to go, and have since taken out that ML upper //. I
find the grains very harmonic, and have posted many setups in advance in the
members' area. They are a very good place to study if you are working on my
methodology. As I have said many times, I find my methodology applies to any
liquid issue on any timeframe. That's one of the many things about it that
appeals so much to me.
The next commentary will be next weekend's edition,
which I will post on Thursday, June 2, 2005.
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