|
|
| |
|
 February
19, 2006 Commentary (weekend edition)-
Today I won't
mention how incredible I think the trading action is. I'll just think
it, to myself. Nah, I can't do that. You know me, if I have a thought in my
head I express it. That's perhaps one of my best characteristics, and my worst.
Anyway, that Russell mini is just unreal in my opinion. The number of moves it
makes, the smoothness of the moves, how they come right off my areas many
times, it's just unbelievable to me. We are all so fortunate to have such a
vehicle to ply our craft on. A day doesn't go by that I don't thank the
'trading gods' for this, and hope it never ends. I'm not superstitious, but
maybe if you all thanked them too... (I'm funning, in case some of you don't
know my sense of humor yet.)
I'll follow the same pattern I have been. I'll start
with last week's Jim's Chart of the Week, showing the S&P.
This chart was a bit more complex, and as I
said, I chose it for that very reason. Sure, I can always show what I think is
a primo setup, one with the greatest likelihood of rocketing right off the
spot, but I've done that to death in here. Everyone knows I can find great
spots. I want to further the educational experience, and show some things that
may have some more depth to them.
Many examples won't do anything I can work
with, either for a potential trade, for management purposes, or for educational
purposes. That's fine, because some will, and then I'll be able to show some
potentially very useful things. By posting a layout in advance not only does
everybody get to watch it 'real-time' on their own and see what they think, I
can point to some areas I will be watching, and the value should be much
greater because I mentioned it in advance.
Let's drop down to a 45-minute
chart, where some fantastic price action unfolded.
For me, it's all about price action. The
weekend after next I'll be doing some mentoring with a repeat student (one
who I have mentored before and has chosen to repeat the program, to take it up
to yet another level), and our focus will be reading price action. In my
opinion, this is getting to a very advanced level. I usually can't get heavy
into how I read price action until someone has a very solid handle on all the
underlying methodology first. In here, of course, all I can do is do a cursory
touch on the concepts, but nonetheless I feel there is great value even in
that.
I suspect I focus on reading the price action, from before the
initiation of a trade right until I close it (and even after, for additional
information), a lot more than most, if not almost all, other traders. I feel a
lot of information is in the price action, and it constantly gives me clues
about what the possible intentions are. Let's look here at this 45-minute
chart. The first arrow is where the initial ABCD play started, as it came right
off my line area. The second area is where we left off with last week's chart
of the week. The S&P looked like it may have done an .886 'test' of the
pattern, and was ready to start moving up aggressively. It was now at the ML I
had for a pattern set. Keep in mind I have many other lines from bigger sets,
so this is a simplified version.
The S&P pulls back off that
median line, and goes right to the .447 retracement area (I go into a lot of
depth in the members'
archive and in the mentorships on the use and importance of this
number). It bounces slightly, and rolls over in a nice ABCD, right at that
lower division line. I'll leave it to the reader to drop down to a lower
timeframe and look at this in detail, as well as work up the setup. Can you see
how I watched the median line for clues, the .447 area, and then the ABCD area
at the division line for clues? What the S&P did in each of these areas
told me something I could add to my assessment. On top of all this, both the
areas of the second and fourth arrows formed patterns that I watch for, and in
each spot the reactions and follow through that did or did not happened also
gave me clues.
The ABCD at the area of the fourth arrow, which was in conjunction
with another, much larger pattern, was a very nice setup for me. It was as
clear as a bell as it unfolded. Now, notice what happened. The S&P ramps up
hard, and 'sees' both lines on its way up to the median line upper parallel,
but the reactions are nominal. Again, clues. The upper parallel coincides with
a .786 retracement and a 1.128 external retracement, among other things. The
S&P rolls right off the area, and I watch for clues. I watch for clues in
some very 'standardized' areas. The S&P rolls down to a .382 and .447
overlap area, and then rockets up and through that upper parallel.
This was a
highly expected spot (there was also one just above this one) for such a move
to start from, and was an additional potential trade area for me, or add-on
spot. The S&P moved well over 30 points off that smaller ABCD setup. Now,
two things should be clear here. First, you can see why I don't just have a
single area, here's the setup, trade here if it hits the area. Far from it. I'm
an interactive trader. Second, most, if not all of the areas the S&P moved
off of were jumping off the chart at me, clear as day.
The S&P,
or any issue for that matter, doesn't always behave this 'well', but here it
was going to the areas I watch, with price action that that gave me a lot to
work with, and doing just about exactly what I suspected, time after time. I
thought this may unfold nicely, hence I chose it for the chart of the week, and
hoped everyone would see this as it played out. Now you can see how closely
your read was to what I was watching.
Let's look at a setup in gold from this
week.
Gold came down to an obvious trendline, which
was also very close to a lower parallel for an 'adjusted' median line set that
I have. It formed an ABCD pattern with two lines from sets on the pattern. It
reacted right off the area, and ramped up nicely. So far, so good.
Let's drop
down to a 62-minute chart, and look at some detail.
Gold went right up to the modified Schiff
median line set's upper parallel, and the first warning line for the 'standard'
set. This is also an overlap area for a .447 off the A point of the pattern,
and a .618 off the C point of the pattern. All these hit in the dead exact spot
the price shot straight for.
Since I had these sets on my chart for the ABCD setup,
they were on before the price even got to the reversal point. Once the price
started up I put the retracements on there. Price went to the spot like a
magnet. I discuss this quite a bit in the last two books. Now, do you think
I find this a critical area to watch? I will get some clues here, for sure.
This will guide me in management at this point. Sometimes the process is very
repetitive.
I'll follow up on OJ.
When we left off last week I said I was
watching overhead, especially the 1.272 area. I had something below that area
that I was also watching like a hawk. There was a tight overlap area with that
upper division line, a 'crazy' trendline of mine, and 1.128 and 1.618 external
retracements. There were other things, too, and I'll leave that to the reader
to explore and find out what they were. OJ rolled dead off the area, which
really is quite a 'glaring' spot on my chart. Notice about how far it pulled
back, before starting up? Clues. Notice how far it went up before it started to
fade? Clues. Now I see what it does, and use that to formulate my next
step.
I'll finish with a basic, yet classic setup from the MR on
Thursday.
I'm very limited in what I can show in the MR
in here because a huge percentage of the setups are my newer patterns and
material, and I don't show that in here. I have to pick out the more basic (but
still highly tradable for me) ABCD setups, of which there is plenty. The MR
does it's 'trademark' move, gapping up, rolling over and forming a pattern at a
line. In this case an ABCD, at a .382 area, with 1.000 time symmetry, an
'adjusted' median line lower parallel, and a median line from the pattern (this
is just the 'framework'). The Russell comes right off the area and runs about
five points. What you see here is the basis for my MR trading, what I try to
look for day in and day out, with all my ABCD pattern variations, of
course.
As I close I will give a small hint about this week's chart of the
week. Do not look at this as simply an area where I might be looking to trade.
Look at the pattern that already played out, what happened from there, and what
the SOX may be trying to accomplish right in here. I must have a premise
and some 'context' before I can even begin to think about what I might want to
do. Without that, I have nothing. I am pointing out a key area I am watching,
but it is only of use if I have a premise. What would your premise be there?
What do you think mine is? What's your market assessment? Then I see what the
SOX does, and how it acts.
The next commentary will be next weekend's edition,
posted by Sunday evening, February 26, 2006.
|
|
|
| |
|
|
 NOTE: Reading this page or
any page on the Kane Trading website, or utilizing this website and any
material
contained herein in any way, shall constitute an
acknowledgment that you have read, understood and agreed
to all
the disclaimers,
terms & conditions, and
policies of this site.
|
|
|
This
website is best viewed with MSIE 6.0, text size set to medium, and screen
resolution set to 1024 by 768.
Copyright
© 2006 Kane Trading. All rights reserved.
|
|
