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 toddstrade@gmail.com
I am always open to questions, comments, or suggestions on how to improve this blog.


Thursday, May 28, 2009

shake-out

Price was nice and orderly on the gap-up for the first 25-minutes as we went sideways along the pivot line, forming a small triangle. Failure led to a nice swift move down. I mentioned a couple of days ago a strategy to play off of a gapping open that worked nicely today (if price gaps up, and price comes back to the previous day's close then look to go short, the opposite being true for a gap-down coming up to PDC. Of course the size of the move back to PDC is going to be a factor in making the trade).
Being that keeping count of Elliott Waves just hurts my brain, I like to use a more simplistic approach in following price structure. A count known as the "ABC" Price Pulse which I learned about through a L.B.R. presentation.
It's simply a price impulse, followed by consolidation, followed then by another price pulse. The following chart of today's SPY on a 5-min basis was a perfect example of this concept.
I have also included numbers (1, 2, 3) which represent another concept (again, discussed in the above link's presentation) where a price impulse tends to have 3 pushes to them. Also, take note that the "B" wave is a construct of a flag pattern. Allow the chart to illustrate, hopefully it's not too confusing.Conceptually, it goes something like this; The A-wave is where volume/size comes in and moves the market after being in a sideways/indecisive/equilibrium level. The B-wave follows where the early-birds distribute (take profits) on part (or all) of their position, while late-comers join in and the additional volume brings price down in the final C-wave.

Anyway, there were a couple of things tipping off a potential bottom in today's early morning sell-off; a TICK divergence (also notice that the TICK didn't get overly bearish, even at it's lowest level), which also appeared on the 15-min chart as a momentum divergence, and to a lesser extent, the resilience of this lower channel line which given support on two other occasions (yellow support line within the 15-min chart).
Speaking of shake-out, here's a trade I got shaken out of today because (1) I didn't give it ample wiggle room, and (2) I was distracted with a 1-minute chart (hence the shakeout) , while I should have kept focus on the larger time-frame (5-min) and my strategy behind the trade. Why I didn't get back in is beyond me. The strategy behind it was a simple gap-fill, with confirmation given in the form of an ascending triangle and price basing at previous support.

2 comments:

Jules said...

EW always gives me a bad headache :-)
Great post, Todd. Thank you for sharing :-) I went with your tips and sold short (sim trade) ES after it gapped up and then went below PDC. You probably already know this: I don't sell. But I did today, and it wasn't so bad! :-) Oh but I lost money chasing. :-)

todd said...

Jules,
Perhaps I should have stipulated to keep a play like that tight and maybe be in a scalping mode. Also, being aware of previous price points (i.e. this mornings opening range low coincided with the previous day's end of day choppy range.
Thanks for your comments!

-todd