Friday I was able to short SLB on a pattern that can be worth looking out for in the mid-day session. Similar to a "Spike & Ledge" or a failed double top, or even a Head & Shoulders pattern with a more prominent right shoulder, here's a basic idea of what it looks like:It's not necessarily a very high probability pattern on it's own, though it can offer a good risk/reward entry. I think the higher time frame can give a stronger indication of a potential short trade, while the faster chart can show you the pace of buying interest (or lack of). So, here was the trade in SLB, the arrow indicating entry with a Fibonacci extension drawn to give a measured move target.
The volume in this trade is tricky. You see a lot of volume coming in at the top (position covering) with a final volume spike coming in at the ledge. Following the volume spike, price begins to climb, leading one to think this issue may push higher (in which case you should look for a bull flag to enter or a base break). However, what followed the move higher was a lack of follow-through and a bear flag!
On the fast time frame it's nice to see these little flags for entry:The Fibonacci extension was used for a primary target, but it was backed up by a few other technical levels (15-min chart 20-EMA, and the daily charts previous resistance level), I held on a little beyond my target until I saw some convincing volume and "bottoming" consolidation on the faster chart.
Here's the daily to show where previous resistance was, but also showing this same pattern presented itself in mid-November (time-frames are irrelevant in chartology, a measured move is a measured move).Now, here's an example in SPLS where this setup didn't work out so well (though still gave a measured move).
It didn't work as well as the previous example, but still gave you opportunity AND warning signs. If your short entry was before, during, or slightly after the gap down in price, you had a number of opportunities to get out at break-even or for a slight loss when you began to see price test that gap level numerous times before breaking out to new highs.
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
I am always open to questions, comments, or suggestions on how to improve this blog.