Friday, July 30, 2010

7/30/2010 Divergence Trade

Good Evening Traders,

I hope everyone had a productive and profitable week! As expected, The market got off to a good start but as the week progressed price started making lower lows and lower highs. I still think that the June highs are a probable target, 1128.00 on the ES. However a lot of technical indicators are beginning to roll over. Its not like I put a lot of trust into indicators but they can become self fulfilling sometimes. Especially in these low volume, high frequency, algorithmic trading times! Maybe, if we can hold above support a few more days the squiggly lines on the chart might align in such a way that the machines decide to buy again. I will do a look at the intermediate term Sunday, for today I wanted to post a simple divergence trade from this afternoon

I was on an assignment and not home to trade, but the 15 minute chart would have alerted me to a great opportunity. Fading the gap down open was the play. I was looking at people's tweet's and seeing how everyone else traded today. A lot of people took the early long and I think it's neat to see all the different methods coming to the same result. I drew white lines on my 15 minute chart to show the divergence in the stochastic and the MACD. Price lined up almost perfectly with the low of 7/23 indicated by the blue horizontal line. Drawing support and resistance lines is a crucial part of trading for me. It really helps me spot the most probable place to take trades.

This divergence trade played out perfectly and that's why I wanted to make it my post tonight. It should make a great reference in the future. When I learn how to on Blogger I'd like to be able to add a category to each post. Like "divergence trades" for this post, or "breakout trades" as another example. This way I (and you) can review all the different trades and how they performed, or which ones didn't perform and why. I'll be working on that this weekend as well as annotating a new daily chart to be posted Sunday night.

Thanks for reading everyone and enjoy your weekend!


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