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!


Monday, July 26, 2010

7/26/2010 Money Management Saves The Day

Good evening traders,

The market played out pretty much as predicted yesterday. First resistance at the 1109.50 Pivot gave us a nice pullback. Then we got a nice divergence off the double bottom at 1104.50 which also happened to be the overnight session high. Funny how those things work out huh...? See if you know these key levels in advance you already have an edge. Let me tell you, I tried trading breakout strategies in the past and then I read somewhere that the big money fades those moves. They were right. I was constantly buying at the high and selling and the low. Now every night I review the charts for possible support and resistance levels and only initiate trades at those levels. You can follow along and make some MONEY too.

On to tomorrow... Price still has to overcome resistance at 1112.50 and I think it will in the next session. I would really love to short the high of 6/22 at 1114.50. Above that is a cluster at 1118ish and another at 1122. Those are areas I will look at for pullbacks. I strongly believe we will see the 1128.00 peak before the intermediate trend reverses. You don't need any fancy mathematics or crazy indicator schemes to figure this stuff out, just look at the charts and draw trend-lines. Its astonishing sometimes how simple it can be.

My trades today include one loser and one winner. As I said last night, I wanted to look for the pivot 1109.50 for the first pullback. I wasn't at my desk when we initially touched it. I thought I could go short and didn't exercise any patience at all with my trade. My money management rules say I should be within one point of the recent high or low before executing a counter trend trade and I wasn't. I got stopped out (not surprised). No big deal though because I got another chance to short and a much better setup the second time around. I tweeted my entry @infected1172. A couple minutes later, the trade went all the way to the bank (again not surprised).

Today's lesson is to stick to the plan and practice sound money management. See, if I only risk one point to make a profit of two points, then I can be wrong 50% of the time and still make $MONEY$! That's simple math right there. You don't need a finance degree from Pitt to get that :)

I know for a fact that I won't be trading tomorrow, but I will be watching the market on my phone and keeping an eye on those key levels. You should too. As always, Good luck


Sunday, July 25, 2010

7/25/2010 Bullish Signals Begin to Confirm

Good Evening Traders,

I hope everyone had a productive weekend. I am using Stock Charts annotating tools for the first time tonight. I hope the chart is easy to read and helpful. I'm starting a temporary job on Monday and wanted to make weekly projections using a longer time frame in case I am unable to post as often this week. I used Stock Charts and not Ninja Charting because Zen Fire does not store enough data to do relevant calculations on a daily time frame. I wish they did but you get what you pay for I guess :) (it's free!)

I'm going to explain the signals I see starting from the top down on the chart. First the ADX. ADX is similar to the Sine Wave indicator I use on Ninja Trader. When the two ADX lines cross there is a change in trend. Notice the lines cross in March confirming the uptrend and then again in May confirming to downtrend. The similar setup is our fist clue that a new trend is about to emerge.

Next I see the Bollinger bands have expanded and price bounced off the center band nicely. The 50 day EMA and 200 day EMA have been penetrated to the upside and the 50 period is above the 200. You can see by the simple trend-lines I drew that the downward trend has been broken and the horizontal resistance has been overtaken at 1099 with a close above that level. In addition to the trend-line violations, price has formed a higher low and a higher high.

A stochastic value above 50 is bullish and the upward slope is also positive. But I try not to look too much into the stochastic. Its good for identifying tops and bottoms in a range bound market but sucks for capturing trends. It could remain pegged at overbought or oversold for a large duration of a trend. Take a look at the MACD though. The Histogram has ticked up and the MACD line is about to cross above the zero value. When the MACD went last went negative it was "flash crash" day.

The last time all these indicators lined up the market began its correction. I still believe that long term the market will go lower. Honestly I believe that the best investments are gold, shotgun shells, canned food, liquor, and cigarettes (long, long term). In the mean time, I expect responsive buying until we get up to the June high of 1131.

There is a lot of bad news now behind us. The oil spill is over, European bank stress tests are done, Greece seems to have their stuff in order, and the "Invisible Hand" will want to juice the market going into the fall elections. So plenty of reasons to think like a bull (at least for now).

I may trade ES tomorrow if I get home early enough OR if I am up early enough. If I do I will be looking for initial support at 1101 area then resistance areas at 1109.00(pivot), 1114.75(6/22 high) and further down the road, the June highs. ES got to 1128.00 in June. There is about 25-30 points of upside to work with. I favor longs, at least for this week! Good luck everyone make some $$


Thursday, July 22, 2010

7/22/2010 Conflicting Time Frames

Good Evening Traders,

I'm Expect the volatility to continue into tomorrow because price is in a key area on many conflicting time frames right now. For instance, we just popped over the 50day MA on a daily chart with rising MACD histogram. Also, the 60 minute chart has a bullish histogram and upward sloping MA's. However the 15 minute chart is still somewhat bearish. MACD has turned down and the histogram is below the 0 line. Also there is a bearish divergence with stochastic making a lower low and price a double top today. Stochastic is also about to cross below 50. With Amazon stock down $12 in after hours we may struggle a little at the open.

I took a trade this morning when I shorted the pivot 1093.75. It was counter trend so smaller profit target. I got one point on two lots. entry was at price 1092.50 at time 10:54 am and exit at price 1091.50 at time 10:59 am. The 1200 tick chart was producing some great trades in the afternoon. A short at price 1094.75 time 3:21 pm which was good for 2 points and a long at price 1085.50 at time 3:39Pm which was also good for 2 points. The significant thing about these trades are that they occurred right where they are statistically most likely to work, at key support or resistance levels. Do your homework. or just copy mine ;)

I updated the 15 minute chart with new levels for tomorrow. There is a hidden resistance level at 1099.50 that doesn't show up because it didn't occur during cash hours. That is the overnight high that was touched three times during 7/14 and 7/15. Keep an eye out for that level. I think if buyers can get things moving early tomorrow they might be able to convince some shorts to cover and it could feed on itself. Or maybe someone will wake up and realize the economy is about to be in the toilet. Who knows, just trade what they give you. Good luck people


Wednesday, July 21, 2010

7-21-2010 More Volatility To Come

Good Evening Traders,

What a wild day! Early on the market came up to the gap fill at 1086 then pulled back to the initial support level of 1076. After a brief bounce, Fed chief Bernanke (who used to whisper fund managers to sleep in fall 2008) caused the market to wet the bed. Price finally found support near 1060 and is now trading again in the bottom part of the weekly range.

Only thing I can be sure of at this point is more volatility. Especially with earnings coming through. Also, I like to think that when The Fed needs to sell Billions worth of Treasury Bills they go out and spook the stock markets. Thereby driving people out of equities and into bonds. Note the Ten Year plunged to a shocking 2.86% today. I will be keeping an eye on the bond markets as well as Gold, which also took a beating today.

I updated my 15 minute chart with new support levels on today's high and low. I noticed they line up well with other swing high's and lows like the double bottom that formed on 7/19, and the opening price on the gap down 7/16. These are the levels I will be looking to initiate trades at tomorrow. Hopefully I will get to trade all day distracted! For added flavor I drew diagonal trend lines showing the triangle we seem to be forming. Thanks for reading and good luck tomorrow!


Tuesday, July 20, 2010

7-20-2010 Bears Ambushed

Good Evening Traders,

Bears got Ambushed today by Apple earnings and some rumor about the fed lowering rates at the discount window .25%. I Wasn't here to trade today and I'm actually glad I missed it! My performance is admittedly poor during trend days because my system usually looks to fade extremes in price or sentiment. The best way for me is to use the indicators to buy pull pullback and trade with the trend. The largest reversal price had was after the opening gap filled at 11:30 Am est. There was a great chance to re-load long at 1060 and get in on that big move up!

Tomorrow morning I'll be looking for a brief test of support and further upside if buyers can get it over the 1084 resistance. If support at 1076 fails price may continue to consolidate above 1070 which would be strong support below. If buyers can keep price over 1070 into the close it could be signally more upside potential.

Good luck tomorrow, and hope my chart is useful


Monday, July 19, 2010

7-19-2010 Key Intermediate term Levels

Good Evening Traders,

This evening I wanted to present a longer term chart for everyone's consideration. When the chart makes a daily high or low and it corresponds to a previous high or low I draw a BLUE horizontal resistance line. If the market touches the line and reverses two times or more over a long period of time I highlight the line GOLD and make it thicker and easier to see. The gold lines are the most important support lines in my trading.

For example look at the gold line at 1057.00. It was the high of the gap down open 6/29/2010. Then it was the bottom of a gap up opening on 7/8/2010. It acted as support again that day and the market rallied. Now 6 trading days later the price falls exactly to the 1057.00 line and reverses. Now you can tell that's a significant level! If you prefer looking at a volume profile chart, you'll notice 1057.00 is clearly an area of acceptance in price. different methods same result. Point is to know these levels in advance so you can anticipate when prices may reverse. The market is a lot more likely to reverse at one of the lines rather than at a random point where buyers and sellers haven't traded very often in the past.

Talking about today's market... It was pretty much a neutral day. You could have expected that after all the fireworks on Friday. I hear a lot of hedge fund managers had their weekends ruined (via zero hedge) ! Regardless of the slow market, price did reverse and begin to make some headway in the afternoon. In the overnight session ES traded down to 1058.50 and reversed. I will be looking for that area as support tomorrow as well.

Buyers will be in control if they can get the market back up into the gap over 1076.00. But if sellers can push it down below 1057.00 its not going to have much support until 1040 area! Basically "Watch out below!" I try to keep the blog mostly about trading, but considering the headlines and crappy econ numbers out recently I am bearish going into this week. Maybe some good earnings will save us... who really knows just trade the charts. The rest is pretty much noise


7-19-2010 One Trade One Winner

Good Afternoon Traders,

I wanted to make a quick post before I had to take my little one to the doctor. I was looking for the market to be churning around down here between 1060 and 1068. After the first strong bounce off support I looked for a pullback in price. When we got a nice one at 11:45 am est, I waited for the stochastic to cross and sine wave to paint blue and entered the trade. I also "tweeted" the trade on my twitter account @infected1172. since it was counter trend I use a smaller profit target, usually 6 ticks. When the stochastic looked to be forming a divergence I got out with +5. So 5 ticks on 2 lots = $125.

I will be back this afternoon after some errands. Might not make any more trades If my daughter still isn't feeling well. Look for an update tonight with key support and resistance levels along with a few trade ideas I'll be looking for tomorrow. Thanks for reading.


Thursday, July 15, 2010

7/15/2010 One Loss One Winner

Good evening traders,

The Market continues to be stuck in the same range as the last two days. All major support and resistance lines are still in play. In last night's post I mentioned that the market could fall to the 1075-1076 area if 1084 support was broken and that was exactly what happened. The Philadelphia fed survey came in way below expectations and buyers pulled the plug.

I started stalking a long when we neared support. As you can see on the following chart I was a little too early on the first entry but all was well in the end. The stochastic formed a divergence and when the sine wave painted blue support I pulled the trigger. The trade ran for the full two points but I only got 7 ticks. Anxiety was my downfall today if you couldn't tell !

One of the most important things about being successful in the market is proper money management. I only ever risk one point on my trades and I look for a target of two points. This is great because you can be wrong 50% of the time and still make $$$ !

Going into tomorrow I'm going to be very cautious. In fact I doubt I will trade at all. CPI is at 8:30am EST and you never know how the market is going to take the news. We closed pretty much unchanged on the day. It seems like the big money wants to see the numbers tomorrow before they put on a position. Volume has been fairly light all week, but it is summer. After CPI is released the big boys will be headed to the Hamptons and the market will likely chop around the rest of the afternoon. If you have to trade tomorrow just be careful not to over-trade. Get your money and get out. Good luck everyone


Wednesday, July 14, 2010

7/14/2010 Neutral Day Wrap Up and Key Levels

Good Evening Traders,

As promised, I uploaded the 1200 tick chart. I marked the trades in white. today was a consolidation day or a neutral day. Whatever you want to call it, buyers and sellers were about even and volume was light. True to my prediction in the last post, the market made a rally into the close. It wasn't exactly parabolic but you can tell that the buyers wanted to close positive on the day (7th day in a row).

There were no divergence trades on the day. Around 2pm est there was a divergence on the stochastic but the sine wave was painting red and not blue, so no trade there.

As far as key levels, they are pretty much the same as yesterday. Just look at the 15 minute chart I posted earlier. I would be cautious on a break below 1084. There isn't much support until the 1076 area. The value areas on a volume profile chart are 1087, 1091-92, and 1074 below. I could post a volume profile but my charting has a copyright clause and I don't want to get involved with that!

As I am typing this (9:30 pm est) the market is trading around 1090 so we aren't getting many clues leading into tomorrow. Making a prediction for the open is a fool's game. I'll wake up tomorrow and do the same thing I do everyday, trade the price action. Good luck


7/14/2010 Resistance Becomes Support

Good Afternoon Traders,

I wanted to make a post on how I find support and resistance levels in the market. The chart above is a 15 minutes candle chart with a MACD and Stochastic. I draw horizontal lines at gaps and at significant highs and lows. I leave the lines on the chart until they are no longer relevant. Its almost scary how often the market pulls right back or runs right into a previously drawn support or resistance line.

Resistance becomes support on the way up and on the way down, it's the other way around. The market is clearly in an uptrend now and as the saying goes "the trend is your friend". Longs are the trades I wanted going into today. Shorts for scalps only.

Today I was looking for a long around the gap test at 1084. Futures tested this line twice and both times rallied off the support. Its 3pm as I am typing this and I wouldn't be surprised to see us go parabolic into the close! Lets see how it goes. I'll update later with the 1200 tick chart to show you how my system spotted the entries.

Tuesday, July 13, 2010

7/13/2010 One and Done

Good afternoon Traders,

Imagine this for a second; You walk into a casino and put a five down at the blackjack table. The dealer gives you a Queen of Hearts and an Ace of Spades. Blackjack! You just won twenty bones! Now you turn around and walk right out of the casino and don't come back until the next day. Winning in the markets requires the same mindset! As soon as you are up for the day, walk away from the table. Then watch your account grow!

Today's trade was pretty straightforward. Short high, cover low. If you did your pre market homework you would have known that 94 would be initial resistance. That was also today's pivot point. I waited for the stochastic cross and kept an eye on the order flow. Buyers ran out of momentum and as soon as the sine wave painted a red dot I went short. Got a great entry too at 1093.50. The two point target was achieved in about 18 minutes.

Two points on two lots = $200. After the trade I went to the gym and now I'm going to pick up my daughter from daycare. Enjoy your day traders and look for an update tonight with key levels for tomorrow's trading day.


Monday, July 12, 2010

7/12/2010 One trade

Today only saw one really good trade. The entry was at 2:06 at a price of 1074.50. this was a Simple stochastic divergence trade. price makes a higher high but the stochastic did not. The entry occurs when the red dots are painted. The two point target was achieved.

On a larger time frame, responsive buyers were present at the 1066-1068 area and as long as that holds the momentum remains to the upside. Its been a slow grind higher for more than a week now and there is no sense in fighting the trend. Good luck tomorrow traders.


7/12/2010 UPDATES

I have been neglecting the blog for to long. I am going to attempt to make daily updates for a number of reasons.

1. It keeps me honest in my trading and I feel more accountable for my actions
2. Its educational for me and you. I retain information better when I write it down or teach it to others
3. Keep sharp. Its easy to get lazy. In trading, fitness, or life in general. adding the blog to my daily routine should help keep my focused.

I have been posting charts and trades on my Facebook. From now on I will send them to the blog. The market is moving as I type. Expect an update later