Have you noticed how opposites often come into play, in life as well as the markets?
MoM and Pop taught me that.
At the beginning of the week, I said to our traders, “56 is support.”
A few thoughts, then time for you and me to continue on our way enjoying the Holiday weekend.
At best, we make crude attempts at understanding where support and resistance are.
When we are right, we capture profits.
When we are wrong, we have a system in place to protect our accounts from serious damage.
It’s called a stop loss.
I hope you heeded my advice about not ruining your holiday weekend.
No one wants me telling you how great we are, and how silly you are; that’s not what I am trying to say at all.
“Give it one shot; pick an area that you think is safer to short. If it doesn’t work, accept your stop out. Do not average in. Try again at a higher level, and if it doesn’t work, just forget it, try again another day.”
We had a seminar Friday. Although it was a crazy day for me; I try to give as best I can. We talked about one of our posts in the Member site titled “Observations and Relationships”. We discussed a broad range of topics, and weaved in some key thoughts about the current market action.
Are we above or below the blue line? The magenta line?
What was the opening price for xxx ?
Does low volume favor Bulls or Bears today?
Is this the beginning of the month?
Is the recent trend up or down?
What is visual support on the 5 minute chart? 30? Daily?
I had a number of non-market brush fires I was putting out. I didn’t get back into my office until 10 or 15 minutes after the open, and had urgent phone calls I dealt with all day long. Relatives were already arriving, including George and the twins. I love it when I am in my trading cockpit, my cocoon, and I can focus. When that rhythm is disrupted, I have a simple rule that protects me from stupidity: Don’t trade.
The half gap and gap play worked, but that was the last of the Mohegans. Shorts either scalped or got their scalps cut off the rest of the day.
Chewy made a great comment, and let me explain part of the process of our system.
Chewy: @eminiwizard: why not go long though, easy money for five days
“Shorts advised to take a point or two”. (Longs, just keep trailing, move your stop up if you are in this. No reason to exit.)
That means we assume everyone knows the recent trend is long, and therefore shorts are contras until proven otherwise. As traders, we can take either side. If we are in the right side of the primary trade… we can trail or take profits.
If we are flat, we can take a contra, join the trend side, or do nothing.
Normal rotational days allow shorts to capture a portion of the day’s thrust, and usually are at least worthy of the risk and effort.
In Rabid Dog Days like Friday, we will destroy our account if we are stubborn and continue to short by “averaging in”.
May I introduce what I believe to be is a relevant question?
“Were you exposed to market risk as the 10 A.M. news was being announced?”
That is the setup I believe that explains why so many traders probably had a hard time Friday.
We are often left with “contras’; assuming that the strong push will need profit taking, especially after a week full of gains.
We usually prefer to be flat for news, and let it play out for a few minutes before doing anything.
Another question worthy of our thoughts:
If a madman goes on a killing spree, can he continue and kill more people?**
Here is wise advice I received a long time ago, that I share with you:
In up trends, pay attention to support. In downtrends, pay attention to resistance.
“Support at the Open, is 1312; resistance 1318″.
The 10 am pop: The next normal resistance is the 22 to 25 zone, but I would be careful, it seems too obvious, and I think 28 is safer”. Holiday mood, and any day hi is possible, beginning of month bias is up. I don’t think we will do more than chop now as traders leave early.(Wrong!) Previous resistance was 18, now support.
Twenty minutes or so, and we have not pulled back at all. Just scratch the short…it is not working. Support 22. If 28 gets taken out, 31.25 is a valid target, and any day high is possible.
Look at the channel…volume is weak, I hate this move, it is manipulated, but visual observation says any day high possible. The machines have no emotion and we can just keep running. Our personal bias and feelings about market price cannot over rule the trade logic we can see with observable facts. We must either embrace that, or give up our money to prove ourselves “right”.
Sixty-eight or so percent of the year’s range in one week seems a tad bit out of the ordinary to me…still, remember: “first do no harm…”
If we short and get 1 to 2 points that is the best we can do, and 3 to 5 points on a pullback is a miracle. We are going higher.
The IB high breakout is telling us there are trapped shorts who just won’t give it up, and they are fueling this push. 26 is now support.
Crazy. Some traders will be carried out in body bags. They just are not recognizing today the market will just keep chewing on stops.
**For those of you who have difficulty with my symbolism, can overbought markets become more overbought?
“The longs are really stupid… but there is only one thing more stupid: shorting this ramp.”
Happy 4th to all.
Enjoy the fireworks, the pretty colors of green, red, blue, magenta.