Quite a messy end to the week during the last hour. We're still chopping around a consolidation level, though we did attempt to break down from it this afternoon.Price did stay above the previous day's resistance level after testing the lows on the day. The strong (impulse) move down this afternoon gave us an example of a price vs. TICK divergence that hints towards an end of trend.If you weren't short for the gap-fill this morning you could have taken the opportunity to go short provided by the retrace to the 20-EMA. I mentioned in a previous post a quick scalping technique that suggests shorting a return to the PDC after a gap up (long the PDC on a gap-down). This week provided two opportunities to trade that scalping method.
The numbers on the chart below refer to the concept of a strong impulse in price giving 3 pushes (mentioned in a previous post). Also notice that during the consolidation phase, after legs 1 & 2 of the impulse move, the TICK doesn't get above the zero-line (a hint at possible further downside, and a good opportunity to take a short position), while the absolute bottom of the move occurs on a double-bottom in the TICK.Later in the afternoon, price tried to break down from its consolidation range which led to an impulse move down. In the chart below the horizontal dash-line represents a support level that coincided with the previous day's resistance level (funny how that works).This break of support gave an impulse move down in (again) 3 pushes (I actually think I labeled this incorrectly, as I would count the first impulse move as the one that is actually labeled "2", while I would count the 2nd impulse move as that labeled "3" and finally, the 3rd push refused to go any lower, "double-bottom"). What's most important when considering these 3-push patterns is potential S/R levels. The "bottom" of this move not only coincided with the lows of the day, but also the previous day's opening range and key resistance level (today acting as support).
Notice how the TICK made it's lowest low of the day, while price stood still.
Other than that, I made a nice trade in CAH. I got an alert from the "First Cross" signal (green vertical line) and entered after looking at the higher timeframe that hinted at a possible bounce. My entry was the horizontal dash-line and my exit was based on a bearish momentum divergence on the 5-min chart (not shown).Looking at the faster time frame, price developed a horizontal base along the 20-ema with a lot of volume coming into it. Price broke out of the highs on the day and (yet again!) gave us a 3 push impulse move up. Again, if one were to miss the first impulse move price provided a fantastic entry at the retrace to the 20-EMA. These patterns happen every day, and provide you with high probability trades.
On the daily, CAH looks like it could have some more upside potential as it corrects the lastest thrust down.
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 email@example.com
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