Chart Patterns

Defining our risk in life is not easy. Many variables come into play, including lady luck.

Mechanical in nature, the market seems to be going through some highly obvious rhythms, and has been assisted by finding some common indicators like today’s 39.25 pivot point.

We need to be aware of getting too complacent, but trades either work or they don’t.

The 48 high magnet sure felt like it wanted to stomp the shorts and aim for bumping a few stops, but long side risk was no edge at the 47 – 48 area today.

Several times some over-anxious shorts likely got their ears boxed if they didn’t perceive the 39.25 pivot and then the 41.5 Angel late afternoon in yet again another higher low. The 47 Demon was picture perfect in the range trade.

We had 37 as likely support, and 43 as key resistance the first hour. When it broke, any high was triggered.  The 60 chart was in play we felt in being stretched, and in need of at least a reasonable 456 pullback, which set the odds in favor of the lunch trade.

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The best joke I heard today: vodka and tums trade at the top. I passed on the tums and asked for a shot of vodka.

I once studied with Larry Williams chat service years ago. We had to call in on the telephone to retrieve the message. I remember him saying “How do we know which one of these double tops will hold? We don’t. The solution is to take them all and let them sort themselves out. That’s the edge.”

Still doesn’t make it any easier, but that’s the defined risk, 1 point or so for the best odds trade in the books.

It is important to see what happens overnight. Carl F again had the range substantially correct.

He sees a 56 target possible, but I prefer the smaller zone first. The 43.75 magnet will give us clues.

Step by step, trade by trade.

With a rollover tomorrow, anything is possible, and it usually takes several passes for the market to switch gears. The 5 point spread allows for the June contract (M) to hit the 48 area.

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No predictions, just thinking out loud.

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Just make the play and stay humble. Thanks Dad.

Battlefield

Absolutely brilliant call by @carlfutia who nailed today’s range.

Day in and day out he quietly goes about business as usual.

Kudos for sharing your insights with us.

Kudos also to a few of our traders Crazee and Triple 7 for calling the 45 gap as well.

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We had the 31.5 right as support, with half gap and gap targets, with the potential 42 43 range established in my mind as possible/probable targets after the 38.75 area broke. The “denial” that some traders were in made it hard to scalp short at lunch, a typical play. We had 37 called as support at the time, with potential target of the 45 gap fill.

I had an afternoon appointment, so stayed out of trouble.

My thought was the 45 area as resistance for the contra, and profit taking in order as the pole on the 90 completed the megaphone pattern.

There was fog in the late morning revisit the 38 area, but “bias long above 37″ kept our traders in the direction of the primary trade.

Today seemed like an attempt to attack traders on both sides, first taking out the stubborn shorts, then taking out the late longs.

Hit and run was advised today, as we expected range expansion from yesterday’s tiny movement.

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When I returned after the market closed, the dependable sunshine line was the perfect exit target for the shorts in that 37 area. Some of the team had caught the reversal contra.

Tricky business today, nimble thinking required.

As always.

Overview

No matter how you spin your interpretation of today’s (non) action, a simple fact remains: Reducing our complex ideas to simple notions is a gigantic leap among the sophisticated black box systems available out there.

Premarket thoughts: Let’s call 41 resistance; remember risk reward ideas, slight bias to the short side despite a weekly and daily breakout. The larger time frames may need time to consolidate, and potentially capture some profits.

Fundamentally there is not much news this week to move the markets, and studies have shown that the Lion’s share of gains comes in the end through the first week of a month.

35 is considered support until broken, and potentially we would like to see that 34.5 area retested, then worry about the 32 33 area.

“Don’t over-trade.”

The ridiculous range caught the over-traders, and I hope you weren’t one of them.

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Breakout Day

We had an interesting discussion this morning, as we often do.

One of more experienced traders suggested that “We may not want to play outside in as we usually like to do.”

“Let me clarify”:  ”Any trade you take short side is scalp only. We expect a trend day, and we are trend players. Outside in only comes from timing trades or from hitting our major targets or major resistance.”

32 was our premarket resistance for the half gap scalp, then the 25 as support since that was the weekly breakout. Shorts were cautioned to be off by the 27, and 26 for sure since the half gap was 25.75. We felt there would be front running.

32 became the next target to be taken out, and our measures said stall at 34.5 was likely this morning.

Horrible chop boxed both sides, in a slim jim that was consolidating the morning gains.

32 support for the 37 to 38 targets, and 38 EOD resistance for profit taking.

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I am not as smart as a few of our traders. We did a poll to see where today’s high would come in.  I chose the 36.5 to 38.25 range. Two winners got it right at 38.5 to 40.5.

I think I will let them run the room next week.

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It was much easier today to be able to speak freely and share ideas with our members, as no guests were in.

While the narrow channel was developing, I pointed out the Spin Bar move,  a trade from the member’s play book.

The “why” and how of moves is taught, and this is a trade I have learned through experience.

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Speaking of experience, a trader last night suggested on Twitter “I am not paying any guru to learn how to trade, I would rather learn myself.”

Good luck with that.

I like this trader and am not trying to offend him.

I responded with the idea that “Why re-invent the wheel? Why not learn from other people’s experiences too?”

What’s the point of paying tuition for college? Don’t Doctors, Dentists, Teachers, Engineers and Professionals in all walks of life learn from others?

Just silly in my opinion.  Some of the professional traders on Twitter sharing their opinion have PHD’s and are street smart. Some of us have paid our dues to them to grow and become more sophisticated in this business.

If someone could show me what I know now after 15 years of study I would have embraced them with open arms. I have spent a great deal of time and money, and it has been money well spent.

Gaining insights from others is a shortcut, an elevator to success.

There is not enough time in life to make all the mistakes that need to be made to grow.. This is something I learned from personal development experts like Brian Tracy, Tony Robbins, Harv T Eker, Napolean Hill, Jim Rohn.

“The wisdom of experience is like a comb that life gives you after you have lost all your hair”.

I’ll take the comb while I still have some hair, thank you.

(Pass it quickly before I need a hat.)

FH is not worth $50 a month? Don Miller not worth his Jelly program? KH not worth $450 for some course work?

Peanuts for world class traders.

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Experience teaches me the difference between Tony Bennett and Frank Sinatra.

You may have to do some digging yourself to discover that.

Some resources kicked around in our room today

Shadowstats

Stratfor

Richard Maybury

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I like this video and song. No political inference should be made about my preferences, despite the producer’s obvious political viewpoint.

We were playing some c, s, n (and y) tunes today (lotsa time on our hands) and I came across this one.

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Intuition

Today’s chart in play helped us to see the potential dynamics as they were, rather than get faked out by our emotions of greed.

The primary morning trade we were lucky enough to get from the 23 high, with scale out partials and a major target at the 16 area.

“We better respect that 15.5″ turned out to be a lucky guess.

Chop ensued, with a narrow range defined during lunch as usual.

The gap fill at the 14 area overnight was the “carrot” that kept shorts looking the wrong way. We had magnets at the 18.5 area which lined up nicely with vwap and helped guide us through the chop at lunch.

I have learned to trust my instincts, and I felt the late afternoon formation was building a potential triangle, so I drew it on our charts for the team, with the comment that the longs were trying to bust the flat top and seek out the stops at the 23 area.

Reacting to “new information” is a vital part of the game. Traders who are in denial only confuse and hurt themselves.

Tough ranges to trade, so don’t beat yourself up if you miss these formations.  Take what the market gives us, and be grateful.

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Volatility at 90 seems light years ago.

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Would any perma-bears please let me know when you finally throw in the towel so we can get short?

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Step by step, day by day, sequence trading is how we view the market.

I’ll let the gurus make the predictions while we try to scratch out part of the move on a daily basis.

One good trade a day is all we need.

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We had a few traders join us again today. I thank you for coming to check us out. No frills, no fuss here with bells and whistles. Just an attempt to continually read the tape as best we can.

The System

As the day wears on, my blog post takes shape in my mind.

Why?

So I can think rationally, unemotionally, and intuitively about what I could possibly say that was the true dynamic of the day’s activity.

Also…it helps me see the trade setups better.

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Here is a sampling of today’s key thoughts for me, based on the evolution of the day.

• Risk/Reward
• Symmetry
• Support and Resistance
• Magnets
• Range Day

This chart was used to establish in our mind the notion that the 15 was today’s important support area.

This chart said “18.25 possible support; don’t press it if it won’t break. Reversal time is potentially near.

This chart suggested lunch pullback was possible; primary target was hit, but it could go higher.

This chart had me say “15 is the only true support right now”.

This chart indicated lunch chop, and caution warranted for the 14.5 target.

This one screamed at me to abandon premise of breaking 15 on first touch.

This one and this one said 19.75 as resistance, target 17.5.

Interpreting the charts is not easy. It takes patience and experience.

The Experience part is admittedly easier for me.

Partial targets are called for the scalers who have more than one contract, and the purpose of our chat room is to teach and explain our system to members. Math comes into play as well, and we are always looking for those trapped turtles (yes again today).

As a system, we focus primarily on:  PPTPAR

• Price
• Pattern
• Time
• Psychology
• Anticipating
• Reacting

Understanding the “snow fence” concept, and that the institutions snow fence is wider than ours allows us to better understand the nature of our risk and reward.

For those traders who are in chat rooms where gurus average in to bail themselves out of bad calls and look good, make sure you have the capital and courage to trade the same way. Just some friendly advice.

No crystal ball, here, no guru pounding his chest “I am the greatest”. Also a reminder I am conservative and do not take all the calls I make. We like to find two to three high odds set ups a day.

Come join us when you are ready.

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Beginner or advanced students, there is something here for everyone.

Balance

Following up on “A sign of the times”, on the return journey from FL  I noted some interesting clues regarding the economy. There was an abundance of commercial and industrial property available for sale/lease along the I95 corridor. I also noticed many “Bill boards” that were clamoring for attention.

“Available” or “rent me” they were saying.

Not a sign of a vibrant economy. With unemployment climbing, it only makes sense, despite what the government has to say.

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Grease is the word, and now it seems You Crane is also of interest.

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Today was a great example of mechanized trading. The early morning low was projected for the 21 to 23 area as our primary target, as posted on twitter. Despite the gyrations intraday, that JTC high held.

The half gap trade was called as the high odds play pre market, and target half gap 16.63 suggested as take most, in a timing play.Falling into rising moving averages suggested take profits, and subsequently the bounce tested the globex high.

We noted a triangle forming but the comp seemed to lack conviction. The formation seemed to retreat immediately, and we called “The contra time” is likely here, and some “turtles trapped” we warned. The 456 trade ensued, and ended in a deep pullback.

22.75  HOD resistance until broken. Testing the 18.25, 17, 16 db and 14.5 gap possible. The time is getting late, so profit taking by 15 advised.

That’s all we can do is make lucky, educated guesses. “The trend line may be too steep”; It seemed like a one -legged stool that needed more time for better balance.

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The live streaming charts and verbal exchange of information is a better way to present our ideas. We had a number of traders allowed in to view our room today, courtesy of our members. It makes us talk a bit in code, and I don’t want to push this or a few of our members will be fed up with the distractions. We also can’t capture our  normal charts while streaming the video; that’s why the lack of my normal posting until before or after the markets lately.

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“Keep an eye on the sunshine line” we suggested to a few who  left early.

Sun is out above it, raining below it, until it gets too stretched.

Money Management

Today was a “soft” day. It was a breakout, but no raging fire day. Just a gentle, squeezing type day that continually frustrated both sides I would think.

The short trade for the half gap almost completed. We had the shorts mostly off by 07, since the weekly breakout was triggered, and called for a potential high of t1 at 15.25. It was sluggish going with small, mechanical type action.

The longs wanted more but had to be satisfied with a few points above last week’s high.

I made it clear to members I was weary from two days travel over the weekend, and I advised them to play hit and run for small targets if they were playing. I did not try and guess every little wiggle.

It was “any high day”, and the steady push up was a ratcheting move that left aggressive shorts holding the bag at the end of the day.

Volume seemed light and the Dow seemed disconnected from the Comp. Not every day is wild and crazy.

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Got lots of hugs and kisses from family, and it felt good to be reunited. I talked with one of my son-in laws about the Chihuly exhibit. Small world. It seems he worked for a photographer back in the 90’s who had an assignment to take photo’s of some one’s art collection, which included a Chihuly blown glass. It required him to physically move the piece for better lighting, and he said “I have never been so nervous; I was afraid I would drop it and my life would be ruined.”

I know a few traders who feel the same way; they don’t trust their discipline to just bail out if the market moves against them.

Why is that so hard to do?

The first small loss is usually the best one.

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“Focus on what you want; not what you don’t want to have happen.”

Paul Pilzer is someone who has some thoughts about building a bigger pie, rather than trying to win a zero-sum game.

This interesting article about Intellectuals discusses the Ivory tower syndrome.

Forget the news, the hype, the broker or guru suggestions. Learn to read the tape.

As Roy H Williams says, Covey’s compass is still as valid today as it was years ago.

Rhythm

Following the Nothing-Nothing philosophy, we are enjoying our last day of winter break in Fl

Snow shovels getting packed, and mixed emotions as we are preparing for the weekend trip back home.

What a blast we had; side by side with my wife, we enjoyed this first journey into snowbirding.

It won’t be our last.

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We had a range/ consolidation day expected, and that’s what we got.

We had the 1108 as resistance, with the bulls determined to support the 95 area (premarket av pivot 96.13) and attempt to take out the 1106 and close that gap during RTH.

Multiple smaller trades available all day long depending on how you played it.

We don’t advise trying to play every little swing; just catch the meat of the move and if we put on two or three good trades a day we feel fortunate. One is really all we need.

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I appreciate all the #FF and rt’s from traders. Thanks for your kindness.

1106.5 was today’s Demon, and the 98.75 was predictably the Angel.

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Home sellers get real.

Unexpectedly? They’re kidding, right?

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Stop Losses

They say if you don’t like the weather in New England, wait 15 minutes and you will get a change.

Looks like the market behaved that way today.

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Amazing is all I can say.

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I told the troops I would not be around this afternoon, as I had been invited to play golf and join friends for dinner tonight.

“I’ll go have some fun and lose a few golf balls.”

Mission accomplished.

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I have learned to reduce some risk on the golf course by being conservative when it comes to taking the gamble for a difficult shot. On one hole I hit a great sand wedge from the rough, over a tree and onto the green. Knocked in a 15 footer for a birdie. Doesn’t happen often enough these days, but it put some life back into my game.

Mr market must have had the same trick shot in its bag.

We had 91 -92 as resistance this morning, and the reversal took that area out and then it was off to the races.

I would have been of little use to the members in this move; I would have thought the 98 99 area would have capped the upside once momentum began.

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My good fortune ended with the birdie. A pond on the next hole swallowed up my tee shot.

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Momentum is a curious thing.

We had the 94 as immediate resistance  in the plunge this morning. Why? 92 felt like support, and when it broke/ was under attack, intuition said “94 as first resistance”. It turned on a dime and dove for the 85 target. “Don’t short too low now; let’s call 82 as support.” Expect some consolidation this morning.

Right call. When I left for Tee time, the market was just approaching the 91 Big magnet.

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I imagine a lot of traders got caught after the market reversed. I like to think it would not have gotten me, but I know better.

That’s why stops are useful tools, just like a sand wedge.

I have no idea why the market turned around, I haven’t seen the news. All I know is if the market gets stretched too far, they retrace. I had the 85.25 as the 38% fibo retracement from the 40.75 to 12.75 swing. I guess the Boyz liked that for their springboard.

They’re smoking those fat cigars right now, that’s all I know.

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