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 February
26, 2006 Commentary (weekend edition)-
Today I will
cover one item of business real quickly, and then we'll get to some chartwork.
There have been many interesting things going on, and I'll touch on a few of
them today, as best as I can in a short commentary such as this. I think I
chose very well for last week's chart of the week, from an educational
standpoint. As I said, my goal is not to show any 'picks', but to choose things
that may aid me in teaching what my methodology is all about. In that sense, I
really got lucky, as the SOX did some great action that we can work with. I'll
also do some follow up on gold, and another MR setup from Friday, since I got a
lot of positive feedback on my MR setup from last week. It seems a lot of
people like the MR as much as I do.
Let's wrap up the business item, and then get
going. I am going to sell off a part of my trading book collection. The total
is fifty-three books. I put a page together for that, and listed the link for
it on the What's New page.
If you are interested please follow up by going to the What's New page, and
then clicking on the link there. I'm not linking it directly here because once
they are sold I will have to go back and 'gray out' all the links, and explain
that, so I decided to only link from one easy to update spot, and that is on
the What's New page. If they don't sell right away (I suspect they will) I may
put a little note on the Recommended Reading page. Okay, let's get to
work.
I'll follow the same pattern I have been. I'll start with last
week's Jim's Chart of the Week, showing the SOX.
The SOX had taken a shot at an ABCD pattern
at a key line, but was bouncing up before completing the pattern and getting to
the line. I thought one scenario would be to drift sideways, hold that .382
retracement, and hit the line via a 'time factor' instead of mostly a 'price
factor'. Since there were several other patterns I work with potentially coming
together here, there were multiple other possible premises for me to work with.
I wanted to read the price action as it unfolded, and see what might shape up
for me.
Let's see what the SOX did.
That upper parallel area the SOX was rolling
off of right before where we left off was a great potential opportunity for me,
as long as I kept in mind the areas below in my trade premise. The .382 and
that key line were not respected, and the SOX dropped hard right down to the
.486 retracement (it's in the books, with the derivation and the
reasoning behind why I use it), right at that median line This set up a
different variation of an ABCD pattern that I watch for. It then bounced up a
bit, and started to fade. Was this a 'test' of the bigger, uptrending median
line lower parallel from below?
Now, all this was very nice, but something
else I was watching and setting up was just fantastic. Let's look at that, on a
60-minute chart.
Take a look at this set! I highlighted just
some of the line interactions. I also put an approximate additional division
line on there in red. You can see on the bottom right the area where the ABCD
came together at that .486 retracement, and how that was right at a division
line. Where did this set come from? I did an 'adjusted' set, based on concepts
from Kane Trading on: Median Line
and Fibonacci Synergy, and used that swing-low by the arrow marked with
the 'x'. If you wonder about the significance of the points I highlighted that
were there before the set 'existed', you have to read the book.
Notice, with
this perspective, how nice the setup was for me at the upper parallel that
followed. This is the same spot as before, with the other set. I have to look
at various sets for each scenario, not just one. Why didn't I show this one
instead? Well, if it hit that other spot dead on and I showed this one, you'd
be asking why I didn't show the one I did. I have to pick one thing of the many
I am watching.
As long as there is action that I can instruct from, that's all
that matters. Now, use this set, look for others on your own, and put it all
together and form a premise for the current scenario. I'm just looking for
areas that jump out, I'm trying to assess probabilities, and then I'm watching
the reactions and looking for entry triggers in areas that I like.
Let's follow
up on gold.
Gold is still moving up off that daily
pattern we looked at before, and is looking a lot stronger now that the first
critical area has been cleared. I have no idea (and I mean zero) what it
will do from here. All I do is assess what is unfolding and adjust my
management plan according to what I have laid out for doing that in my 'Trading
Plan'. The market unfolds as it unfolds.
Let's go back down to that
62-minute chart, and see what is unfolding there.
Gold made the initial first thrust off the
pattern, and when we left off it was 'testing' a key spot. It quickly thrust
right through that area, and then rolled right over. I know more than one
trader who was very nervous at this point. In situations like this I have my
plan all laid out from Kane Trading
on: Trade Management, and I just let it unfold. It is not significantly
different than what I do intraday with the mini's.
I built a set
for the latest price action, and gold dropped right down to a .447 retracement,
which was close to a division line for this set (not shown). It then went up
and 'tested' that key price area from below, and rolled down dead to the line
from the new set, right where it intersected with that other set's upper
parallel. To make this even better, this was a clean, clear version of one of
my patterns. All you full set buyers out there know exactly what I am talking
about here.
Gold then jumps off the area and starts this next push up. This is,
altogether, classic 'wave 1 and 2' action. Now I see if a 'wave 3' unfolds. As
I said, I have no idea what may happen. I have some 'probability calculations',
but in the market anything is possible. Now, it's all about management.
As I've said many times: same old, same old.
I'll finish with a basic, yet
classic setup from the MR on Friday. Notice I used the same exact line from
last week's MR setup.
The MR forms an ABCD with a key line just
below, and a very tight grouping with a key .382 retracement in there. I
noticed a few things, though. I saw the median line from a 'standard' set and a
lower division line from a modified Schiff median line set coming together
right near the grouping, just above the key line. Price reacted in that area,
went right to that one median line, pulled back and set a higher low, and then
really took off.
Two points here. First, the price action was so clear there was no
doubt whatsoever, in my mind, what was happening. Second, I don't have to have
a key line hit before I will trade, or a grouping or area. I'm looking at this
holistically, and once the price gets close, especially if the 'time factor' is
close, it is all about the price action and entry trigger. Understand that we
are talking about one-tenth of a point for the grouping (one tick) and
four-tenths of a point for the line, below. That level of precision is
unrealistic.
I am not going to miss a trade that is triggering properly because
it didn't make the final tick down to my area. It's just an area, not an
exact spot. The mini ramped nicely, hit a much larger set key line (not shown),
and rolled right over in an ABCD. Notice this came together at that lower
parallel, and up it went. Notice, too, how the lines were 'seen'. If you want
to know a bit more about why I think there was additional 'pressure' for the MR
to roll over where it did, it's in MLFS.
Now, how was today's commentary?
Was there some meat there? I'd say you got your money's worth (no, wait, it was
free). Well, even if you did pay I'd say it was a good deal. This is the type
of thing I go into in a lot more detail in the mentorships. If I were to do another
book (no, I'm not even thinking about thinking about it) it would probably be
Kane Trading on: Reading Price Action. In the meantime I'll do what I
can in here, and in the one-on-one with those that I work with. There is a lot
to be learned from the price action.
The next commentary will be next weekend's
edition, but I will be 'out of town' doing a mentorship, so this may not happen
until Monday, or maybe even Tuesday. On the other hand, perhaps I will find
some time, somewhere. Keep trying back, but it likely won't be 'posted by
Sunday evening, March 5, 2006'.
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