The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at
I am always open to questions, comments, or suggestions on how to improve this blog.

Friday, August 29, 2008

trend day

Well, surprisingly USO did not trend inversely to the indexes. There were some great shorting opportunities within the ETF's that I watch (yep it's QLD redux time). Of particular interest for me is documenting the same sort of set-up I have seen countless times (and with countless different securities) throughout our current market environment.
An opening range (first 45-min to an hour) is violated with a NR7 bar (doji in this example) kicking things off to the downside. This move also took place at the S1 pivot support area. The crowd piles in, drives prices to another support area (with a prior day significance) where a retrace takes place to tag a moving average (13-period in this example).
After tagging this average (and resistance is established) price continues it's slide to the downside where a bottom works itself out, a double bottom (at S2 pivot support) in this case. It is after this point where a greater upside test could be expected with anywhere from a 38% to a 50% retracement target (from high of day to double bottom low).
The window of opportunity presents itself when price squeezes between a fast and a faster length moving average (in my case I'm using a simple 5 & 13 period), or as price rises above the mid-line in a "W" formation (I got in late, but knew my target provided sufficient risk/reward). After this move exhausts itself another short position can be entered. In this scenario (and since you have locked in profit from the earlier day's trades) a stop at break-even gives sufficient wiggle room for the chop that ensued for the remainder of the afternoon, just before positions started closing out at the end of day.
Enjoy the extended weekend! By the way, I'm curious to see what Tuesday will bring for IWM after a very large volume spike in the last 10-minutes of trading today.

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