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.

Monday, November 30, 2009

A closer look...

....into POT's opening price behavior. A lot can be learned by observing areas where price pivots to make a higher high or lower high.
This morning price gaped up (higher low) above the previous swing high (higher high), and above the previous day's range.
- Draw a Fibonacci Retracement from the previous day's close to the open. Can price hold above the 50% level? Volume on a price reversal tells you it can...back to test highs.
Price puts in a higher high, but retraces sharply.- Draw a Fib. Rtr from the most recent swing low to high. Can price hold above the 78.6% retracement? Price reversal and volume tell you it can...Test the highs.
We now we have a series of higher highs (2) and higher lows (2), giving traders support for buying into a potential breakout of the Opening Range High (ORH). Of course there are those that may be fading the highs that early in the morning as well (of course there could be scalpers as well, just playing off of the 78.6% retracement and targeting the previous High).
If we're looking to get in on a breakout then we need to have some sort of profit objectives.
- Draw some 3-point Fibonacci Price extensions and look for confluence areas, where price could either turn around or consolidate within. They can also highlight swing lows to trail stops off of.
The two extensions drawn here are both projected off of the same swing low (the most recent one), but one is a measurement taken between the PDC and the Opening High, while the other is the most recent low to high range.
Those 78.6% retracement levels always seem too steep to rally off of, but it often acts as a key pivot.

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