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 July 3,
2005 Commentary (weekend edition)-
I hope
everyone enjoyed his or her holiday weekend. I spent mine working with a mentor
student, which I actually prefer over doing the usual holiday type of things.
Every time I do mentorship
work (which you all know is not too often, by my choice) I really come away
excited and energized. It's a lot of fun for me to really dig deep into the
material with someone who is highly enthused and working very hard at learning
the methodology. It usually winds up being a learning experience for both of
us.
Let's move on to today's topic. Long before CME was being talked
about all over financial television as another GOOG, I had been working with
it. I have pointed out setups in the past on this one, as I find it quite
harmonic. After it had really run up off one of my setups CME looked like
this.
When I say 'established trend', this is what
I mean. No doubt about what CME is doing here, and no doubt I don't want to try
to call a top on this one. I want to get on board the trend, if I can
find a setup to help me do that. My preferred method to do that is an ABCD
pattern. Let's see what happened shortly after this point.
CME corrected back in an absolutely beautiful
ABCD pattern. This could also be viewed as a 5-point pattern. Once the C point
completed and CME started to roll down I suspected an ABCD might form, and I
built my groupings, as outlined in the books. The 'traded timeframe' would be the
weekly, with the entry timeframe on the daily, and possibly the 130-minute.
Let's look at what I put together up close on the daily.
I had three groupings I wanted to watch,
based off the three alternate ABCD price projections I watch the most closely.
I also noticed an interesting time retracement off of a key swing-low point
that fell right in this area. And although this is still just the basic
framework here (in other words, I had a few other things on my chart), I will
still say "there is one more key thing missing I must add in". Let's do that
now.
I added in the upper and lower parallels for
a modified Schiff median line set. The ML lower parallel hit right into my
lower grouping. This setup had a lot of things hitting in this area, really
guiding my decisions. Notice the high level of harmonicity, judged by the tightness
of the groupings. Given that this is the entry timeframe, CME has triggered at
this point by several of the methods I outlined in Kane Trading on: Entry
Techniques.
As I have said many times before when asked how I know
which grouping (or 'sub-grouping') is the 'right' one: for me, it's the one it
reacts off of (which I don't need to know ahead of time). Although this is a
very advanced concept to truly grasp, the point of the 'sub-groupings' is to
determine the level of harmonicity, not necessarily to pinpoint the potential
trade area down to an unrealistic level of precision.
I am looking
for the general area to 'go to work' in, and then I let price action guide me.
I also get a big benefit from the 'sub-groupings', in my opinion, in my trade management and stop setting,
among other things. This methodology, like the ecology of an ecosystem, evolved
together such that all the pieces fit together and are necessary to the
whole.
Let's finish up by seeing what CME did from here.
CME rocketed off the area and put in another
major move, just like GOOG did off the big ABCD it had before its last rocket
run. Notice how much before the media had this one I saw the potential
opportunity. And if, for some reason, the initial entry was missed, CME gave a
spectacular second chance off another pattern I have been working on.
Can you see
it there? I probably won't publish that one, not because I don't want to share
it, but because I can only do so much, and I've written up quite a bit already.
Besides, I have so much material of substance to study now, if you get through
all that, sign on to the service and grasp all that I
show in there and you still want more, send me an e-mail and I'll likely share
it with you.
This is just a quintessential example of what I am always on the
hunt for. I find more setups across all the liquid stocks, futures, and FOREX
than I could ever hope to trade. Add in that I watch across many timeframes,
which has the effect of basically clearing the slate on every issue each time
the timeframe is changed, and you can see how many potential setups there are
at any given time. Funny how I never heard word one on financial television
about this setup when it was unfolding.
The next commentary will be next weekend's
edition, posted by Sunday evening, July 10, 2005.
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