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 November
27, 2005 Commentary (weekend edition)-
Today I'll do
a few follow up charts, and then show two setups in the Russell mini from the
past two weeks. Since I haven't done very much mini work in here lately (funny,
since that's where most of my effort actually goes for my own personal trading)
I have gotten a few requests for some mini material. A lot of what I do is
based on my most advanced work and I don't show that in this free commentary,
but there are still plenty of good, solid setups using the more basic ABCD's
that come together all the time, and I surely still work with those. Just
because I have some new material doesn't mean I pass on the other setups. Now I
can just sift through more choices in my quest for the best setups.
I'll start with some follow up on
BZH. The reader is referred to previous commentary for some background on this
one.
BZH just keeps smokin' up off that setup,
setting new all-time highs on a daily basis. It sure doesn't look like the
homebuilding market is dead just yet. This was a basic application of the
methodology, and it has become one of the ones that has really ran. Some do,
and some don't. When they do my style is to try to stay with the run. I'm a
trend trader, and as I have said perhaps too many times, my style doesn't use
'profit targets'. The market tells me what to do. I outlined this in Kane
Trading on: Trade Management.
Let's look at gold.
Gold made it right to the 'adjusted' ML set
upper //. There is an external retracement right there, but it is one of the
ones I don't show in here, so I deleted it off. Given that GLD went up on
Friday I suspect this may not want to roll down just yet, even with that line
there. We'll see. My play is long, and in management mode. I wouldn't even be
thinking short here regardless of whether I was in a long play or not, since
the trend is clearly up. I am watching gold very closely for my intermarket
analysis.
Let's look at a setup from the previous week in the MR. I'll show
this on a 3-minute timeframe.
The MR had been selling down, and I was
looking for a short setup, preferably in the form of an ABCD of some variation.
I set this up on the close as one potential scenario if the market opened up. I
have a .300 retracement in there (I explain in Kane Trading on: A Totally New 5-Point
Pattern how that number is derived directly from Phi, the 'Golden
Ratio', that is, 1.618), and an .886 retracement. Of course my full working
grouping had a bit more in it. I added a modified Schiff median line set on
there. The upper parallel hit right at the grouping area.
The market
opened up and ran right up to the area, where it started to react. Let's see
what happened from there.
The MR dropped like a rock right off the
area. That area of 'congestion' is actually another pattern of mine (it's in
Kane Trading on: Four 'New' ABCD
Pattern Variations). The MR triggered off that latter setup and
continued down even further. The MR moved about 9 points off the initial setup.
It is not uncommon to have the MR just do setup after setup, especially when it
is trending on the timeframe I am watching.
Let's look at
another setup, from this week.
The MR has been 'grinding' a bit more lately.
By that I mean it is moving, but instead of a lot of wild swings (which I
generally find very tradable) it is just under steady accumulation. My approach
is pretty much still the same, to watch for my ABCD-based setups. Here the MR
pulls back in an ABCD at a .382 retracement area. I have the same modified
Schiff median line set on there, and another line. That dotted line is a lower
warning line for an 'adjusted' median line set I have on my working chart,
based on the techniques I laid out in Kane Trading on: Median Line and
Fibonacci Synergy. I only showed the warning line here. It acted as
'uptrending support' in a sense here, as it came right into the area of
interest.
Let's see how this played out.
The MR came right off the area and ramped up
almost 5 points before the close. The really interesting thing for me is,
again, that 'congestion'. It was yet another of my patterns, very clearly
visible to me on the 1-minute timeframe as it unfolded. And right before this
setup we are looking at here? Three more of my patterns, clearly visible on
this chart. That was five in a row on this run here, all of which 'played out'.
I find this amazing (and useful for my trading). It's not so much 'my
methodology', either, as it is that I have worked very hard on trying to
understand the nature of price action, and I think price frequently behaves in
a somewhat repeating manner, in my opinion.
The next
commentary will be next weekend's edition, posted by Sunday evening, December
4, 2005.
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