Thursday, May 31, 2012

TF with Market Profile Targeting

After /tf stretched. 

Market internals bottomed around 11:30 am -- European close.   End of month is an important time to look for unusual strength -- in this case... the market was able to bounce 150 ticks on /tf before giving up most of it.   The triple bottom was a clue for a possible bottom and the wedge break provided an entry with no heat.

Tuesday, May 29, 2012

Higher Timeframe Perspective: /tf

Notice how looking at /tf through multiple timeframes suddenly makes today's bottom crystal clear.

Rainbow Reverse

Market took a dive on weak data but recovered.

Market Signals were very strong, even during the pullback.  All sectors were green which is highly unusual.  However, the best entry still required patiently waiting for the Moving Averages to fan out and the downtrend line to break.

/tf offered about a 50  - 60 tick move with no heat -- even entering as late as the chart shows.

/tf rips, dives and rips again. 

Monday, May 28, 2012

/gc: Backtest: MMA Flip Entry

This seems to be a high probability entry.

Gold is hard to trade so you need a lot of confirmation before safely entering with a tight stop.

This TL break actually extends back to Friday...

It then backtests through the 99 day MA which has not moved to the top of the ribbon and is sloping down.  Here a short ends up capturing a  60 tick move with no heat.   So even on a no-volume holiday -- it's possible to find the same old same old pattern.

Key elements:

1) break of a Higher Timeframe Pattern
2) volume candles suggesting distribution
3) Multiple Moving Averages lining up to show trend down
4) small backtest into resistance.
5) Awareness of Market Signals (euro and oil were starting to fade)

Memorial Day

Clearly not a good day to trade with low volume and U.S. markets closed.

Looks like Greece news is good and Spain news is bad.  Long weekends, in my experience, tend to bring out the buyers and we're seeing some modest buying... but starting to fade.

Traders have to be willing to not trade when the action is not favorable. 

Enjoy the day.

Friday, May 25, 2012

Friday Euro Top Out

Great example of  triple top, multiple moving averages fanning out and trendline break.

The thing I'd like to point out is the correct entry for a 70 tick move (with no heat) came THREE HOURS after /6e had topped out.

There's usually no rush.

Thursday, May 24, 2012

Multiple Moving Averages At Work

/tf breaks prevailing trendline and rips faces off shorts

Finding the start of a new trend is key skill.  There's a lot more to trading than a good entry, but let's face it, it's hard to go wrong when your entry is spot on perfect.

I am now looking at 5 moving averages on my chart:  9, 20, 33, 50, 99 period.  The MAs flow like a ribbon and fan out when the market is speculating and converge when there is price agreement.  They also help you clearly see trend direction.

The /tf actually had several up and down moves before the big one at 3:15.   Lots of news creates lots of uncertainty.  However, the 100 tick rally in /tf end of day had several indicators that might have prompted one to enter at the very onset.

The first noticeable pattern was the clear trendline that was sloping down from 10:30 am.  The market was falling apart.  The 99 period MA (orange) is the top line for most of the decline, which means the major trend is down.  It's very hard to get long when this condition is true.

At 3:03 -- the first clue should hit most /tf traders as a volume candle pops price above this well-developed trendline.  This proves not to be enough and the bounce fades below  again.

But then a tight, symmetrical 3-bump pattern emerges and the moving average ribbon is starting to trend up.

At 3:17 the trendline is broken at last and an entry around 759 at worst with a 10 tick stop would have been good for a nice ride.  Notice at this point that all the moving averages have stacked on top of each other and now the 99 period is underneath, sloping up, indicating support from longer term investors.

So elements that helped with this trade are:

1) moving average ribbons to indicate trend
2) trendline formation and subsequent break of prevailing trendline to indicate new market forces
3) 3-bump patterns -- often form before major moves
4) critical time of day for big moves (11:30 am when European session closes, 2:30, 3:15ish)

Hope someone caught some of this move.

Wednesday, May 23, 2012

Spooky Technicals Bonus

/cl (crude oil) fell so hard today it broke under $90/barrel briefly.  One could not even find any clear resistance points unless one switched all the way to the daily chart.  Now look at where it bottomed out today -- and look at last Halloween...

The market can remember bottoms from a long time ago...

That's a technical boo to you.

Reversal of Fortune - /TF

This is how the bottom looked. 

The main headline coming out today was... if Greece leaves the euro, the results will be catastrophic.  Oh,  and we'll also rally 220 ticks from the bottom and close at the highs. Obviously...

Need to consider entries based on straight TL breaks -- especially after hitting key support levels in Higher Timeframes.  

NoteTo Self: What I'm Looking For

1. Establish general trend by looking at daily then 15 min. candle charts.

2. Determine areas of major support / resistance based on areas of heavy congestion, places of previous bounces.

3. Watch Market Signals for confirmation.

4. Look for trendline formation on higher timeframes for major topping / bottoming areas.

5. Switch to 1-min candles once market enters key support / resistance area.

  Observation: For shorting a key level, it appears waiting for the 9 day MA to cross below the 33 day is a key signal. As long as the 9 day is clearly above with no breaks... the market will continue to drift higher and pick off stops. This is an easy way to avoid entering too early.

6. Look for heavy volume and key 3-bump or double topping patterns with high tails to attempt a trade.

7. Be  patient with trades that immediately go my way.

  There may be more points I'm missing...  This is an updated general checklist.

Tuesday, May 22, 2012

/TF Tops: You just got zuckerberged!

First, here's the 15 min candle chart that would alert any astute trader where /tf might be entering a heavy supply zone.

Around 10:20 am - /tf was on a roll.  But the 15 min. chart above shows potential supply.  Given that the daily charts are sloping downward, one should certainly be thinking a pullback is possible.  However, in order to safely avoid getting whipped and avoid the psychological pain of waiting forever for a drop, the next step is to look for bearish indicators on the 1-min chart.

And here's what we see:

The first thing I observed was the Puke Candle at 10:20 am.  However, I have added a new indicator -- quite simply, called the Dump Candle.  Just because price was rejected at the highs, does not mean the market will selloff.   At 10:43 a big volume sell candle printed so this suggests there are bigger sellers getting out.  But still, no pattern to work with.

At 11:11, another Dump Candle prints.  This is FIFTY minutes after one has already determined we are probably topping out... and here we are, still waiting for confirmation.  Patience is a virtue.

/tf began climbing up once again but this time, note the lace of volume.  At 11:28, it is possible to draw a descending trendline (3-bump pattern) touching 3 points.  Here at last, is the ideal short entry -- risking no more than 8 ticks.

Needless to say, this would have worked.  /tf went on to drop over 100 ticks from this point... with less than 5 ticks heat.   (70 ticks within half an hour from entry.)

In fact, a trader in a chatroom I frequent (, rode /tf for nearly 130 ticks.  Real traders are making these trades.  And they're not predicting or thinking.  Just executing a plan. 

If you are struggling and looking to improve your futures trading, just keep studying and observing and writing.  This set up is nothing new to this blog.

I hope you had a good day and didn't get zuckerberged like some probably did.  If I can accomplish one thing on this site, it will be to spread the use of the word 'zuckerberg' as a verb.  I think we all know what it means.

See you tomorrow.  Oh, and if this post helps, all I ask is that you send a link to someone you know.  Sharing is caring.

Monday, May 21, 2012

Stop Thinking: Keep Planning

If you ever see a tweet that starts "I think... "

Just stop reading.

"I think this rally will continue... "
"I think AAPL is a buy down here... "
"I think I saw a puddy-tat... "

Does it matter what you think?
Does the market care what you think?

(answer:  no, and hell, no)

What we should be starting our sentences with is the following phrase:

"If [x] happens, I will [do something]"

This popped into my head and I must say, I don't think I can remember the last time I read a tweet like that.

If stocks gap up in the morning, what would you do?
If there is negative data from Germany tomorrow and stocks gap down, then what do you do?

We just had the best day of the year for the Nasdaq composite and what I've often observed after big up days is a "Z" day where the market will tend to zig-zag at least twice during the day.    up-down-up or maybe down-up-down.

So for example, if  /tf hits 764 tomorrow and I see several Market Signals showing problems... I will look to short 764, especially if a 3-bump pattern develops there.

If TLT falls off a cliff as it broke below its 15 min. chart on Monday, I will add to an initial TBT purchase.

Let's face it, the last year or so has been dominated by headlines, mostly emanating from Europe.  There's no point in thinking at all.  If Greece defaults, it's a shitstorm.  If Ben starts QEIII, we gap up 4 billion points. 

CNBC and other media have to try to explain every day why things happened and they will continue to predict and predict what happens next. 

We don't know what's going to happen next.  We do know that all traders are humans.  Yes, most trading is done by robots but the humans still control the robots.  And therefore, the market will always continue to ebb and flow, overshoot and undershoot and continue to repeat patterns based on human psychology for a long long time. 

Our job is to master our own emotions and play just ahead of the crowd.  Get ahead of that and you turn into a value investor.  Get too far ahead and you're a deep value investor. 

But that's just what I think.

The Face Ripper Cometh

At 10am: Bulls open up can of Whoopass on shorts

In my last post, I mentioned that making predictions is dangerous.  And six hours later -- my point is proven.

Because let's face it, the only predictions anyone was making is for more pain.  And then the shorts had their faces ripped off.

10am was the key time and it was very clear on the 15 minute chart something new was happening.  /gc had already broken its 15 min trendline two days ago and /6e had done so on Friday.  So it's not like this was out of the blue.  In fact, the market was all but giving alert traders a heads up that The Snapper was coming.

With all sectors green,  leaders leading, and European stocks doing fine, one could safely assume today was going to be a trend up day.  This assumption would have been made around 10:15 am.  But even if it took you until 11 am to figure it out... one could have still profited from it.

There is a simple strategy to playing trend up days.  The hardest part is recognizing it's on.  But after that, you can usually buy breakouts from all pullbacks, all day.  So you might have caught the first pullback long for 60 ticks and possibly a second one for 20 more.

Or maybe you missed it -- maybe you were frozen.

However, the incorrect thing to do today was to try to short.   No doubt many traders tried to short this market -- after all... they were locked into their predictions and after all... the market is going down.

But the charts do not have opinions and they don't care about yours.  A 15-minute trendline break with strong Market Signals is extremely significant.  See what happened to /gc and /6e two days after crossing their trendlines.  

Now, one could argue volume was very light and so forth but there was no way anyone should have been thinking about fading today.   Hopefully many of you did well.  For those that were leaning long, it was probably a wonderful day.  But of course, those holding longs for the past week are still probably deeply underwater. 

But as traders, we try to look a few minutes or hours ahead.  We don't predict or hope or pray.  We follow charts, we observe, we execute a plan, we get a smoothie.  (Or for some, perhaps a beer.)

Congrats if you had a good day today. 

So will everyone now be predicting a rally?

I don't know and I don't care. 

I Predict More Predictions

Noticing a lot of predicting going on.

Cramer predicts bank runs.

Twitter is full of predictions of Facebook falling below its IPO price.

If you check the news/Twitter today -- I guarantee you'll run across at least two or three predictions.

Why do people love to make predictions?

And more importantly, how does predicting the future help you make good trades?

I don't think it does.

The main reason being: Nobody predicts the future well.

And those that can probably aren't sharing.

Predicting the future can only hurt you by creating a bias in your thinking.  Once you predict a stock has to drop, you will likely tend to focus on news that confirms your prediction and ignore information that disproves it.

I think making predictions is a natural tendency people like to do.  It makes them seem incredibly smart when their predictions come true.  And when they don't come true -- predictions are easily forgotten -- no one is ever held accountable.

CP Traders do not predict whether a trade will work or not.  They take a trade based on probability.  If it goes against them, they stop out for a small loss.  If it goes up, it was simply probability working in their favor.  It was not divine insight.

Let other people make predictions.  Focus on the charts and your patterns and rules.

And I predict you'll do just fine.

Sunday, May 20, 2012

Value Investors: Blogs To Follow

Just wanted to mention if you ever buy value stocks -- check out Old School Value -- listed in my blogroll.  He's an interesting guy with some decent links to other fascinating bloggers.

In fact, I just added a new link I found on Old School's site -- Grumpy Old Accountants.  The link is also on my site to the right.

Just two new resources worth a look.

Stay Connected

So I just read this Imagine: How Creativity Works.  It's a very good book.  Similar in many ways to The Tipping Point which has been a best-seller for years.  It's well written and covers a variety of topics all equally fascinating.  I'm not trying to sell the book.  Get it from your local library for free like I did.

I'm mentioning it because there is one concept that connects to successful companies and people -- they tend to be well-connected.  After reading this book, I realized just how powerful and important Twitter is -- particularly for stock traders.  Staying connected to a constant stream of ideas, and focusing your stream to display the top traders, is only going to improve your own learning curve.  Trading is mostly a lonely endeavor.

So the key idea I would recommend to all traders is -- always be enhancing and refining your network.  Whether you use Twitter or belong to a chat room -- these connections will only serve to improve your results.

If you aren't already part of the human network of Twitter, you could always follow me -- and then follow some of the people I follow.  I am always looking for new traders to follow and occasionally dropping someone when I realize their tweets add no value.  But definitely cultivate your online network -- I believe now, that is vastly more important than most traders realize.

Imagine: How Creativity Works

IWM: Daily Look

Quick glance at Higher Timeframe -- this time the daily.  IWM closed below its 200 day MA on increasing volume but it is about to move into a heavy supply area.  There is plenty of room for a Snapper Rally back to the established black trendline so it would be wise to consider this possibility as the world melts down.

If you've been trading for 10 years or more, then you know that the world has been on the brink of collapse almost every two years.  People have been calling for a crash every six months.  It's noise.  Yes, we have room to fall some more but we're way off the mean-reverting line now.

Good luck next week.  I'm sure things will only get crazier.

Visit to see more great charts.

Saturday, May 19, 2012

Why You Gotta Be So Mean (Reverting)?

error: the white oval should be on the next spike to the right

This was  /cl from Friday -- a beautiful example of a key pattern that I believe -- from months of observation, has a high probability of returning anywhere from 5 - 10x one's risk (of 8 - 10 ticks)

The left chart is a 15-minute candle look that clearly shows a downtrend.  So yes, one SHOULD be looking for places to get short.  However, occasionally, the market offers a lay-up inside out trade -- in which we go long and hope to catch a ride back to the upper (descending) trendline, which can often be a sharp, fast move.

The key elements are:
1) What would it take for /cl to stop falling and mean revert?

    In this case around 9:43 am -- /cl dropped to 92.01 which was almost exactly the low of the overnight session around 1:15 am (this is the place I mistakenly placed the white oval).   So this was a perfect double bottom and natural place for a bounce.

2) Is there a bounce pattern?

   A double bottom is not enough to go long, especially since the Higher Timeframe trend is down.  (Heck every time frame is down.).  But a 3-bump pattern -- especially one that is tight and perfectly symmetrical as can be seen on the right chart, is a very strong indicator of the market gathering up for a bounce.

And as you can see, the next 25 minutes is pure joy for longs -- as /cl screamed up -- right into resistance as drawn by the descending trendline, and continued its natural course downward.

The 3-bump pattern does not occur very often but it is one to watch for when attempting a mean-reversion trade, especially if you can identify a potential bottom (double bottom this time).  You would only risk 8-10 ticks.  3-bump patterns work right away or they don't.  You don't have to give them room.

Now enjoy the weekend already.

Friday, May 18, 2012

Baby are you Down, Down, Down, Down, Down?

/tf 5 min candles on left; 1 min on right

Another down day.

No suprise.  Daily chart is in a downtrend and the correct mindset should be to short bounces into resistance.

Instead of 15 min. candles... one may need to adjust to hourly or, in this case, tighten up to 5 min candles.  The trend is not only down, it's been accelerating, so the 5-min candle helps you see the bounces are stopping lower and lower.

Once again, my favorite pattern developed -- ye olde  3-bump and a short at this area would have been a fast and victorious payday. 100 tick plummet in less than one hour.  You could have then gone out and enjoyed your day.

People on my twitter stream are now talking about bounces, oversold conditions, etc.  A futures trader though, must listen to the only opinion that matters, the charts.

 With the moving avgs. sloping down, there is only one correct course of action.

That said, the other chart of interest was the euro, /6e -- which broke out of its 15-minute candle chart and proceeded to open a can of whoopass on shorts.  The action was identical to the /gc chart yesterday.  So that certainly made shorts think... but the /tf was oblivious to the euro action.

I think trading futures is difficult because one has to correctly ignore a host of inputs: news, media, Twitter, your emotions, your opinions, your thoughts...  and focus solely and -- act mainly mechanically in your executions.

 It requires constant focus and an ability to overcome hours of boredom.

However, I think the reward of ending your day at noon with $1000 is worth it.  If you pull it off.

Anyways... the weekend is here.

 I recommend you get some exercise, do something fun, and spend time with people you love.

Good day to you, sir.

Thursday, May 17, 2012

Big Picture/Little Picture: New Look

/gc 15 minute / 1 minute candle charts provide macro/micro view

Quite honestly, I wish more CP (consistently profitable) traders do what I do -- attempt to actually show their trades and thinking.

Yesterday I was thinking about how hard it is to trade and see the markets clearly and I realized it might be best to trade with two charts of the same market in multiple timeframes.  It was an experiment so I chose to enter in my PaperTrading account.

The morning was obviously a mess -- it's a bear market and all.  For futures, I look only /cl, /tf, /es, /gc, and /6e.  Just so you know.

And in the morning, the /gc just stuck out like a sore thumb.  What the heck is /gc doing breaking out of its longer term (15m) trendline?  Gold has been a horror show for weeks.  So even though I tend to avoid /gc because it's just a beast,  I decided to take a shot in my Fake Money account.

 I saw the wedge in the 1-min chart and had a clear trendline drawn in so I decided to make a not so good entry just under 1548.  My stop was much much wider than usual -- just under what should have been the support line.  I then went to make a cup of coffee.

So I come back, sit down, and discover the papertrade is up 80 ticks and I watch a bit longer because I have a target at 1558 and hit flatten to close it out with 94 ticks profit.  In 27 minutes.  Best futures trade ever.  Fake money.  Bought myself a fake fancy watch with the fake profits.  And /gc went on to rip 300 ticks a half hour later.  For some reason I was watching something else.  Which is good.  The only thing worse than losing money is making $3900 in fake money. 

 As for /tf and the rest of the market.   The prevailing trendline in /tf broke down around 11 am and at this point -- you could just throw out the rulebook.  The Market Signals were mostly bearish, although gold and OIH were hanging on.   Since the daily charts of most indices are in correction mode, you have to always be looking to short into resistance these days.  The Daily Timeframe determines your general mode of attack, then the 15 min. and 1 min. charts help you pinpoint the exact area to enter.  Which should mainly be to the short side.

Unless of course you see gold doing what it did. 

I'm not sure if anyone else trades this way with multiple timeframes simultaneously.  I feel like there's more insight to be had as I trade with this on the screen.  It doesn't really change any of my strategies or patterns or rules -- it just helps me sees things a little clearer.

Anyway, I've got a lot of thoughts about the meltdown and the general markets but I'll leave that for another time.  My main focus here is to share specific trade ideas that may spark insights of your own.

These bear markets are scary times but for futures traders... they are certainly full of opportunity.


Breathe in.

Breathe out.

Though the world swirls around you, you remain calm.

Wednesday, May 16, 2012

The Bigger Picture: 5-min /tf

5 minute candle chart of /tf reveals all   

And as an additional note: Here's what I should have been focusing on.  The early ramp in /tf led straight to the current resistance area...   

Once the market broke down... it went straight to the very lows of the European session for a full rainbow...    This is natural action in a bear market. 

Always start with 5-minute candles or wider before moving to 1-min candles.  In fact, it may be that one could successfully trade with only a 5-min candle chart. 

Failure is an Option

Today I waited all day for a chance to go long.

Unfortunately, everyone has a bias and despite trying to remain always neutral, I tend, like most beginners, to want to trade long.

So knowing the trend was down in the afternoon, I waited for my favorite support pattern to emerge and it did.  And I went long.  And I lost money.  I had a lot of reasons to think the market would bounce.  But it doesn't matter.  Had I held on instead of taking the 8 tick loss, I'd be down 26 ticks as of this post.

Now, the next question is: What did I learn?

If I have to lose $100 or any amount of money, I should at least learn a little something for my money.

We are in a bear market.  Duh.

The market is very kind to shorts.  Even if you enter late, you win.  It doesn't require fear, just lack of buyers.  So it's important to shift one's bias to shorting in bear markets.

 The market is very sloppy and news driven, too, which makes patterns less likely to work. 

But mainly, I learned you gotta be a bear in a bear market.  The markets screamed higher in the morning... /cl had a huge move along with /es.  But instead of waiting to get long at the end of the day, I should have been waiting for the markets to hit resistance and short /tf.  It would have been an easy time -- even had I waited for the Moving Averages to all flop over and gotten in late.

Follow the predominant trend... I think that's the right thing to do.  So if you've got a long bias like I do, acknowledge it, and overcome it and trade with the general conditions as much as possible.

 And always honor your stops.

When Does the Trend End, My Friend?

Despite weakness, the euro, /6e, managed to climb into the green.  This chart is from just about an hour ago as of this post.

The 9, 33, 99 day Moving Avgs are all above each other, meaning the trend is up.  I know the euro is going to zero... but my rules suggest you have to respect the trend.

There are two major ways trends end, in my opinion, and they often show up clearly on charts.

The first is the triple touch trendline, as shown above.  It also helps to consider the higher timeframe -- the euro has been sinking on the daily and 15minute candle charts... so a topping pattern is likely to work.

The other topping pattern is a double top.  For double tops, I'd like to see a long tail 1-minute candle and a high volume (Puke Candle) as the first top. Even better, the double top takes place in a Supply Area or area of congestion. See the chart of /cl below that took place around the same time.

double top in Supply Area and weak market is a good short

So main new idea:  Respect your moving averages... they'll keep you on the right side of the flow until a Topping Pattern suggests the trend is over.

Tuesday, May 15, 2012

Oil: The Slippery Slope

Trend is your friend, especially in /cl

Here's the oil chart stopping at 12:30 pm when the correct short should have been made.

Oil looked good after the morning data but slowly started slipping back.  The big news was the Greeks causing the euro to plunge which is usually bad for oil.

Things were complicated with strong Market Signals.   XHB and IYT were strong along with AAPL.  But slowly, the markets kept slipping and most importantly,  oil and the oil sector was vastly underperforming the tech sector. 

 And one should always short the weakest markets. 

At 12:30 -- a clear trendline could be drawn and a safe short entered with an 8 tick stop.  This was over 80 ticks from the high of the day.  But it was the right thing to do.

 Had you kept moving your stop along the extended TL (drawn as the day moves on) -- you would have witnessed an epic drop for over 150 ticks. 

The Moving Avgs. on my chart help me identify the trend.  I want to see the 99 day MA under the 33 day when the TL is established. 

 The /tf also plummeted but a safe entry would have given about 90 ticks max - - and you'd have to be perfect.  So with the market starting to show weakness... always chooses the weakest chart to short.

 Hope today was not too painful for many holding longs.

Quick Checklist

1, Check Higher Timeframes for Patterns / areas of  support/resistance

2. Check 1-min candles for Supply Areas and Patterns (3-bump trendlines, double top/bottoms)

3. Check volume - particularly at areas of support/resistance

4. Check candlesticks patterns at sup/resistance areas (long tails especially)

5. Check Market Signals (qqq, xlf, xhb, iyt, uso, oih, ewg, ewp, gld, aapl, fcx)

6. Check  time of day, month (is it near opex? end of month/quarter

7. Check for any data coming out.

Monday, May 14, 2012

Gappy To See You

5 minute candle /tf on left, 1 min candle on right

Another day of pain.

Gap down opens are difficult because - obviously - things are already down by the time the market opens. 

So what to do?  You have two choices:

1) go long for a bounce
2) wait for a bounce to clear resistance so you can trade  WITH THE TREND.

The chart above shows choice #2 -- it required a lot of patience.

Eventually the market came off the bottom and "rallied", however, a quick check of Market Signals showed tremendous weakness (XLF, XHB, KOL, EWG, JJC, EWP, UNG, OIH all red).

The next step was to check a Higher Timeframe to figure out where Resistance would prove futile.

A 5-min chart showed a clear descending TL (chart on left)

A few minutes into the touch -- one could draw a slightly turned down TL and then it was a safe short with 8 tick stop.  The rest was nothing but downside. 

So key elements:

1) Determine the Major Market  Direction (trend down day! this was obvious)
2) Determine a clear resistance level to enter (this required a lot of waiting)
3) Set it and forget it.  

As it turned out - -/tf fully retraced to the lows for 80 ticks... with essentially no heat.

I missed this trade unfortunately... but hopefully next time we all catch it.

Saturday, May 12, 2012

Taste the Rainbow: /cl patterns

Everything I'm looking for every day in one chart

This is the /cl chart from Friday.  It had it all.  The perfect rainbow.  Premarket is weak, then a rush of buying.. finally a clear 3 touch trendline can be drawn and /cl goes on a rampage (know your markets! - /cl loves to rip straight up... far higher than seems possible)

I also know from months of watching that a single Puke Candle is never enough to short /cl.  It can still run another 100 ticks.  In this case, a second Puke Candle formed with a long tail candle. At this point, one should be thinking -- ah - this is probably a top.

But the thing is, you didn't have to catch the top.  You almost never have to to make a living trading futures.  The moves are so big.  A while later, a new trendline formed heading down. 

I often suggest an 8 tick stop because beyond that - you're just giving up extra ticks.  If you're correct, you won't need more room to prove you're right.  /cl wiggled a bit but then went on to dive over 100 ticks from the entry point on the chart -- note how far down that is from the double top.

People love to have ideas about the market.  They love to make predictions.  When you are trading properly, with known patterns you are searching for, you'll instantly realize that most of what people talk about on Twitter (on StockTwits that is) is NOT trading.  It's noise.  Who cares what you think, I think, "gurus" think.  So what if the market "could dive another 20%". 

I've gravitated toward figuring out how to trade futures because you can make money every day and leave it all behind at the end of the day.  If the market drops 2000 points, it will have rise back up, won't it?  And the same patterns will emerge to indicate a bounce. 

I've found over the past few months that the more emotional, news-driven days tend to provide the biggest moves... and not quite often, in the total opposite direction of what everyone seems to think.

And ultimately - that's the final point I'd like to make.  YOU DON'T HAVE TO THINK.  You don't have to have an opinion and you don't have to predict.  To succeed you have to:

1) Be patient   <---- hard for maybe 90% of most people
2) Trust your patterns.  <--- Do you trust yourself?
3) Keep learning and observing new patterns/ideas.  <--- Because the market is always evolving.

Trading is simple but not easy.  Like many beginning traders, I think what will help me the most is to do less of the things that I think are helpful and just focus on the simple act of reading the charts. 

Now go on and enjoy your weekend.  Next week, let's hit some homeruns.

And be good to your mothers.

Friday, May 11, 2012

Puke Tops

/tf cuts through top, taking out stops, then dies

Today's trade is a new pattern I'm watching for: the Supply Umbrella. It's simply an attempt to go outside in -- or rather, nail the top.

The key elements are:

1) Do you know where resistance is?   In this case, tf topped out at the same place 794.5  -- twice yesterday... so we knew this would be an important level.

2) Are you watching the overall market?  Many signals were down -- with JPM and other markets weak off the bat.  So when /tf went straight up at the bell, no doubt this caught many people off guard.

3) Watch your volume.  What we want to see at the top is a Puke Candle.  The huge volume spike as /tf cuts just above yesterday's high by 2 ticks was probably algos taking out stops.  Suddenly - there's no more stop-hunting and no reason to continue higher.  The Market hurt those who were impatient.  For the rest of the day, /tf lazily gave back most of the move. 

You can also play Puke Candles as a bottom.  Again -- they work better when the Market Signals are strong. 

4) Recent Patterns.  This is a new idea.  But essentially, the market is always changing things up.  For the past few days however, the market has tended to dip at the open, rip around 10:30 - 11:30 (when Europe closes) then give most of it back).   The market changed up a little by simply ripping right from the start and dipping premarket -- but the  down-up-down move was the same.  You can sometimes anticipate the same pattern repeating for a day or two... but eventually -- and suspect by Monday the market will do something new. 

This entire dip and move back to previous resistance -- I'm calling it the Supply Umbrella pattern.  It's a U-shape that moves all the way to an area of supply -- plenty of sellers were willing to exit at the top.  Lots of supply. 

Finally, as a bonus, I am trying to watch call buying activity to see if I can find stocks that might be under accumulation by institutions.  The only name I bought based on this activity right now is FIO.  There was a rumor DELL would buy them.  However, there was call buying days before the rumor and it did close up  4.5% today.  So watch FIO.  You should follow OptionsHawk on Twitter as he provides more ideas. 

Well, good luck and enjoy the weekend.  Maybe it won't rain. 

Thursday, May 10, 2012

The Long Ranger: Trading Rangebound Market

/tf gap fill and run to yesterday's high (and beyond)

Details to follow but the chart is a beauty and speaks for itself.

Wednesday, May 9, 2012

/tf: small patterns within the range

/tf provides small patterns for nice rips

Once again market gapped down.

Key to today was -- checking your key levels.  And the most important levels of the day are often yesterdays lows and highs.

Today /tf really gave a nice lesson in technical levels.   It dipped to yesterday's low -- TO THE TICK -- then ran all the way up to fill the gap down from the overnight high.

 In between, you could have safely entered at least twice.  A third triple bottom was dubious -- but it also worked out if you took it.

 Once the market hit lows, stocks like AAPL were suggesting a bounce.

Again, moving out to a higher timeframe -- using 15 min. candles -- the /tf kept hitting this key trendline -- the last high around 790 tagged this well defined channel.  So it was clear where resistance was.

 Once again, fear and news provides opportunity... the system provides the profits.

/cl triple tops before plunge past overnight lows

There was also this gem of a set up in the premarket.

Tuesday, May 8, 2012

Big Drops = Big Moves

Hammer candle today...

Oil plunges with everything else -- fear run rampant.

 And then it doesn't.  You just trade your plan.  If your plan is based on years of observation or backtesting and sweat... then trade your plan.

 Eventually -- /cl tapped out a 3 bump bottom -- the very low being close to a double-bottom area.

 You couldn't have known what would happen next -- but you could take a long and risk all of 8 ticks... and watch it go... for the rest of the day.

 I cut off the chart too early -- in fact, /cl ran over 150 ticks! from this entry and ... you would have never been down more than $20 bucks.

 /tf also had a perfect 3 bump TL form much later and that one ran around 90 ticks.  

 The TL is the place to be. 

 Fears of Greece and whatnot set these patterns up since everyone reacts too strong to short term news (which has very little affect on 99% of most stocks).  So take advantage of human emotion.

 This pattern works because it is essentially structured on how human emotion works.  Unless people change their psychology  - (I mean the entire species) -- this pattern will continue to provide big rips and small losses when it does fail.

Monday, May 7, 2012

Enter Break of Higher Timeframe.

oil was on a 2 day plunge -- gapping down to 95.35 on Sun. morning.

 As the day progressed -- a clear downtrend line formed on the higher timeframe 15 m. candles...

Market Signals improved quickly with most sectors green and EWP, EWI up over 2%.

Eventually the TL broke and this changed the picture -- one should attempt a long here as oil could easily climb on short covering with no clear resistance for a while.

 As it turned out -- /cl moved about 80 ticks at best... before double topping, then triple topping -- a clear signal to exit.  Either way - this trade would have provided a strong daytrade with about 8:1 R:R.

Key concepts:

1) Identify a clear trend on a higher timeframe.
2) Monitor Market Signals for market direction
3) Look for a 3 bump pattern or breakout pattern after the TL has been broken.  (In this case, one could vaguely make a case for a triple bottom as the TL was broken.

4) Set a tight stop as this breakout pattern should work immediately.

Timing is indeed everything.

Sunday, May 6, 2012

Incredible - /cl Support from 3 months = 100 ticks.

Always check your higher timeframes.    Futures plunging but someone doing a quick check of daily charts would see the probability of a bounce at 94.35 was high.  Easy long for 100 ticks. 

  Know Your Support Points.

Friday, May 4, 2012

gold stands out: focus on strength

Market got hammered today after NFP data but gold had already established a 3 touch TL that led to a massive spike on the data.

 But even if you missed that, you could have waited for the same pattern 2 more times, both yielding nice moves with less than 10 ticks heat.

/gc stood out because it was the only market that was green.

 Meanwhile, /cl got clobbered... all the way down to 97.50.  Despite being one of the worst markets, /cl set up way down there...  creating a similar 3 bump touch after a big volume candle at the low of the day.  That was also good for 70 ticks.

 So no matter what the market is doing, the same pattern can yield the same solid results. 

 Gold was the better choice since it was strong and you're going long.  With /cl -- one had to wait a long long time to even get a chance.  /tf also created the pattern but only rose 30 ticks and gave it all back.

 So when looking for the 3-bump symmetrical move... it's better to have a strong market on a strong day.


Thursday, May 3, 2012

Trend Days Reward the Patient

/tf trends down

market started out weak and just got weaker.

Patience paid today.  Today's clear and obvious entry emerged just after 11:30 - and was good for over 100 ticks.

 Trend days can pay for a lot of bad trades.

Once again, a 'triple top' pattern emerges before the play of the day.

Wednesday, May 2, 2012

Higher Timeframe Bottoms:

Today started weak and my mistake was not checking the higher timeframe.   IWM bottom was not random -- it was 2 cents off the 20 day MA, and it also was a few cents from the lows from 5 days ago (in IWM) -- so not surprisingly,  /tf bounced hard and strong.

 However, Market Signals were weak and there were two great opportunities to get short safely -- both required waiting for a triple top to form.  This made more sense since the signals were terrible but the market likes move and fill gaps.

Tuesday, May 1, 2012

Rainbow day

Patience was required.  But even late into the rainbow -- it was over 100 ticks down from the entry.