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Chart of the day 6108


I thought there was a thread like this but can't find it. We'll have DT move this stuff if somebody finds that thread.


Ok, Here is a pattern I've mentined a few times that happened today. It capitalizes on the first 90 minutes when we consolidate. We are basically looking to trade the 4th leg of a "M" or "w" pattern. This was taught to me by the same guy who explained the pitbull plus and minus 4 numbers etc.

Today we opend at 1133.75 in the ES and that was inside the previous days range. So we are thinking the range may be limted due to where we opened. read MOM for details.

Now the specific trade is this on the 5 minute chart ( what I was taught from):

1) You see the market Rally - Leg 1
2) You see the market Decline - Leg 2
3) You see the market rally - leg 3
4) YOU are now hunting for shorts to complete the final leg and creat the 'M' pattern.

The reverse of this pattern is that you would be trading the 4 th leg of the "W" pattern.

You can use the pitbull method on this or buy or sell into the plus and minus numbers. Here is a trade from today. Like anything else it helps to have some context to help "PULL" the market in the direction you want it to go.

At the time this trade was taken the Overnight low or high was not taken out yet. We had the three legs of the "M" pattern and I was trying to get short as I thought they wanted the O/N low and the 27 - 28.75 area. So that was the context. The initial entry was a bit agressive and quick and personally I think it would be a safer trade to have sold the opening low ONCE you knew you were in the fourth leg of the pattern. Here is the chart for study and this is a very good example from a visual point of view. They aren't always this "pretty" and the legs aren't always this clean looking. Knowing we are consolidating helps give one confidence in the pattern


This chart shows the "legs" on a one minute time frame.

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mpattern
For context you can look to the ES day trading threads but here is today's early morning key ideas...

Test of the O/N can not break the low and we begin to rally and form triples in front of report. The report scared me off from initiating in front of it but this thread is really about the key ideas and not specific trades. I suggest for those interested , to read and re-read MOM and the concepts of where we open in relation to previous range and the type of driving activity that can take place.

On my "vacation" I went back and reviewed my last three years worth of trades and many of my losers and poorly timed fade trades could have done less damage to my bank account and ego if I just remembered to follow a few simple ideas. Ideas that I once knew very well but "forgot" over time.

Anyway, today there where some good fades and incorporating the type of open had me trading smaller for those. And good thing as the first air pocket fade had runners missing target by one lousy tick.

Here is part of today. We opened outside of the previous days range. Very different then yesterday.
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5 min
Since we are all in the sharing mood.

This is a 5-min screen that I use for RTH. I take the opening 5-min range and project fibs both ways. This gives me a proportional map for the day. I want to see what prices on either side of the opening range reflect proportion with each other which helps me determine targets.

Whether you agree/believe in proportionality, I certainly do, the reason being the human mind (whether actual human staring at the screen or a human programmed computer) searches for beauty. Proportionality is beauty.

Ok, enough of the esoteric stuff. You can see I have horizontal lines on the chart. The long dashed red and green lines show YD's RTH h/l. The dotted red and green lines show O/N h/l. The gold line is the pivot based on the 24/hour range.

You can see what Bruce is talking about above as prices test the O/N low but rebound quickly.

Something else on this chart are the yellow bars. This is a paintbar formula created by Marc Chaikin called the "Chaikin Volume Spike Indicator". The indicator will paint a bar yellow when its volume is (default is 1.65) standard deviation above the last 20 bars.

As you can see the first two bars had spikes on them and the second bar showed the reversal as the bar encompassed the entire opening range.

Very interesting that we had so many volume spikes fire. That is unusual to say the least.


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5min09232010
This chart is just showing the 15 minute bars.....I mentioned most of what you will be seeing in this thread at one point in time in the day trading threads before...there is reference to this concept in todays thread.

This shows how we have the one point consolidation bar on the 15 minute chart...I'm always looking for these and you can gear stops and targets to them. Hopefully the text is self explaining...if not just post a question....

I've been told that every 15 minutes a bell goes off on the trading floor....don't know if it's true but somebody likes this time frame...especially to find consolidations.
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lowrange
and here is how it held back the decline for the late rally today...snapped at 3:50 EST....and the answer is "no" I wasn't a buyer to get long....just keeping it real...sure wish I was!


This is just snapping lines at the low range bars high and low...to frame out the key area
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rally
and here is Thursday's low range before the sell off...( Part of the right side and low prices is cut off on this chart- for reference see RTH of December ES contract 9-23 -10)


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thursrange
Wanted to share this with everyone. Notice the two red arrows I've put on the chart. As prices breached Fridays high (green dashed line) we had a volume spike occur (yellow bar). The subsequent failure to hold that high and close beneath the low of the volume spike was a good indication prices were headed South.

Why you ask? From a volume perspective, the spike showed a greater then normal volume coming into the action as prices pushed over Fridays high. The fact prices couldn't hold this level showed there wasn't enough new volume coming in to keep prices moving North. Hence a move back to at least VWAP was probable.

From a proportional view point, notice prices traded down to the 2.618 level beneath the opening 5 min range but the upside failure came at just above the opening range. Another indication new buying interest wasn't coming into the market.


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5min09272010
Context for today was expecting the consolidtaion day...we had the "W" pattern ( reverse of the M that started this thread) into the minus 4 - 5.5 zone..open was 1144 which is a classic pattern in the first 90 minutes.

We had triples and a gap off the divergence to use as a target...triples later in the day.


Key point: When we consolidate and have low Volume the YM and ES will diverge so all these little swing highs and lows need monitoring..



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monday
not sure why my chart got scrunched...anyway i encourage you to look at todays 5 minute for the concpets mentioned.....we also extended originally equal amounts below and then above the IB range
Third lower high trade.
I know some don't use them and that's what makes a market. It's a high probability trade and there were, and usually are, other confirmations for a low risk trade with a well defined stop loss exit. The stop loss exit would be the second lower high at 1146. Less than a point for the aggresive. Anticipating the setup is preferred. Trendlines help and the 2nd lower high either breaks or doesn't.
It's a simple setup and it's a quick answer if it's right or wrong.

The wave down can end and reverse fast to take out all of the 3 highs.
The wave down can end and reverse fast to take out all of the 3 highs.
That was not a typo. I point it out so that you know. The trade is usually a profitable trade even when it does reverse back up.
Using your methods and the downtrend line to define profit taking will keep it profitable even if you let it go back up to the blue downtrend line for an exit. Personally, I would add the fib levels for a judicious decision as these tend to be fast trades. This one ocurred at the end of the day. They frequently happen intraday.
This is a trend trade. The risk/reward ratio is apparent.
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es 12 10 9272010 15 min66
Here is the "M" pattern from Wednesdays trade...context was that we opened inside the range of Tuesday and the O/N session was symetric. Also there were no reports schedule at 10 a.m. and we had left over trips and a micro gap down at 36.25 from Tuesdays trade.

So once the 3rd leg up beigns then you are stalking short trades...

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mpattern
Thought it would be useful to post this chart of today's action.

I've marked the chart with red arrows showing yellow volume spike bars. The first one came right into the O/N high (green dotted line). After reversal, prices never recovered. I know this came before the 10:00am news but if one waited till after the announcement there was plenty of time to position short.

The bottoming action is highlighted by two yellow volume spike reversal bars coming off R2 of a range based support/resistance calculation. The yellow lines are a Dr. Steenbarger formula for calculating S/R using Fridays range.

Another thing to note is how prices worked through the fib matrix off the opening 5 minute bar. Just follow prices through the matrix visually and you'll see how they bounce between the proportional subdivides of the matrix....beautiful to observe!

One other thing to note. The green moving average on the chart is a 600 period moving average which behaves much like the 200 day on a daily chart. You can see how prices collapsed after the MA was broken. It had been providing support since the first test on 9/23.


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5min10042010