Friday, August 22, 2014

Dow breaks through resistance. A look at the Yen, Euro, and S&P 500.

Dow went through resistance, once again with the rally on below average volume.  There is not a lot to add, this has been the case for more than a year.  It's truly unique in terms of auction markets and the history I have studied and in my experience.  The golden opportunities to short the Equities have been almost few and far between.  Here is a look at the Daily chart.

(Click on charts to expand)

A similar setup for the back test of a prior extended significant rising trendline support that became resistance after can be seen in the Japanese Yen futures recently.

I find the strongest signals are the failure to breakout of significant patterns, where the risk becomes well defined and the reward potential is a multiple of risk taken. 

A few examples of failed breakouts, and nasty reactions that offered large multiples of reward to risk taken, and additional opportunities to go for the jugular with increased position sizing by adding to the trade at other key reference areas while not increasing risk substantially which thus exponentially increases the reward can be seen in the S&P 500 futures and Euro futures Hourly Chart patterns recently.

The failure to break from a significant trendline in these timeframes is highlighted in the blue ovals.  

S&P 500


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Tuesday, August 19, 2014

Nikkei 225 has had my attention lately

The Nikkei 225 had a good looking "Bullish Inverted Head and Shoulders" pattern on the Hourly chart which coincided with a "Bull Hammer" in the Big Picture, which I noted with the blue oval on the right hand side chart below.  Notice the drawings on the Hourly chart left hand side for the two "shoulders", a "head" and then take a look at how the extended "Neckline" was strong support on the throwback after.  The failure to hit the measured rule of this pattern might setup a low risk high reward short trade we shall see.

Like the Dow Jones Industrial Average Futures, the recent pattern in Volume screams of Distribution.

(Click on chart to expand)

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Dow is now at resistance in the big picture

The larger the degree timeframe the more significant the signals, there is much noise in the smaller degree timeframes.  Recently the Dow had a decent pattern on the Hourly chart (left side below), and the trendlines on the Hourly chart looked significant with the multipoint touches, both as support and resistance, with resistance becoming support after breaking out last week of this expanding triangle pattern.  What is noteworthy is the failed breakdown on the Hourly chart which I have highlighted with a blue oval on the candlesticks, which was accompanied by increasing volume, only to see the meltup again on lighter volume to new swing highs. 

But now the Dow is at an extended significant trendline resistance in the big picture.  Let's see what sets up here.  The Pattern of Distribution in Volume on the lower sub-graph is beyond glaring to me. 

(click on the chart to expand)

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Wednesday, August 13, 2014

Dow Chart and a trading competition for fun

I have been following the Dow closely lately.  Here is the latest look at the chart below and the most significant development is on the Hourly chart as the Dow has rallied off a downward sloping trendline support and we shall see if a significant level of resistance forms or not near term.  I find myself less interested in writing and more interested in making short videos, which I have been sharing with some, and have yet to post on the blog.  The blog may begin to change from writings to short videos.  It saves a lot of time and words have different meanings depending on how we stress them with a tone of voice.

Last week I entered only my second trading competition for fun.  Both were short term "challenges".  Both competitions were on a simulator, with a starting balance of $150,000 and a max position size of 15 contracts.  The first had a daily loss limit of I believe $3,000 (this was years ago), the second had no daily loss limit.  Both challenges had some similarities and differences, but doing a trading competition has a completely different mindset for me as a trader since there is a "beginning" and an "end", so increasing pressure is there to make the right decisions, mistakes are always costly but especially when we are looking at only "days" to trade.  It is also very hard to be patient when the numbers on the leader board are flying for some early on.  Which might encourage some to be reckless or gamble.  In the first challenge I finished with a profit over $7,000 in two weeks and finished 15th out of approximately 250 traders.  Annualized its over a 100% return.  I was conservative I felt afterward, trading an average of 3 contracts per trade, rather than going "all in" max position size with every trade which can be tempting.  That is not my style.  When you go max position size, the loss is always maximum compared to the reward on the trade.  Nobody is right all the time, so the formula for success if flawed in my strongest beliefs if you trade same position size with every trade.  When you add to a winning trade, there is a way to increase the reward potential without increasing the initial risk taken on a trade.  Therefore the winning trades will always be relatively speaking a multiple of risk taken, and that is a good formula for me. Anyway, I felt that the next competition should I enter one like this, I would start with a "5 lot" as the minimum position and look to add two more times for the max position.  This time around that only happened once, and that was the big trade that made all the difference at the end of the challenge.  Over one week I had a 5 lot trade in ZB (Treasury Bonds) for around $1,500 in profit, a 5 lot trade in the NQ (Nasdaq 100) for around $5000 in profit, a 5 lot trade in NG (Natural Gas) that took only a $250 loss, and the 15 lot position that I build up in the Nikkei 225 that hit for more than $20,000 in profit.  Final total at the end of a single week, as this second challenge was only a one week competition was $179,000, a profit just under $30,000 in one week.  First place in the end had me beat by a few thousand.  I know there were over 150 traders in this competition but not sure of the true final total.

I may put up a video of the trades, but to write about each specific trade is very time consuming.  I have been doing short videos of simulated trades and may be sharing them with others who are interested in the trade management, risk management, and money management strategies of mine.  The biggest myth in the world in trading is that "entry" is what is most important.  There are key reference areas to trade from, and a trade location for entry is important, but it is only one single spoke on a wheel.  The exit strategy determines how much you make or lose on a given trade.  Do not spend more time on "entry strategies" than your "exit strategies".  Nothing is easier than getting in a trade.  There are dozens of other spokes in the wheel, such as "money management" and "position sizing" principles as well as including the psychological spokes of "discipline", "consistency", "objectivity", etc.  None more important than the other.

In the meantime here is the Dow chart.  I felt she had potential for the "waterfall" decline out of that support line on the Hourly chart last week but it never failed.    Let's see if this resistance forms three points of contact on the Hourly chart as then in my opinion a significant pattern has developed and a strategy can be put in place to "limit risk", and "maximize reward" potential at the key reference areas.

The last two posts on the blog on the Dow can be found here and here.

Friday, August 1, 2014

Dow chart

Its been an interesting trade setup in the Dow.  Failed breakout to the upside on the Daily chart, and then sharp breakdown after, with the Volume pattern setting up the higher probability price action to the downside in my opinion.

(Click on chart to expand)

The Daily and Hourly chart offered good location to enter a short position and add to it with massive reward to risk ratios, as well as great structures to manage the risk on the trade after if attempting to go for the jugular. 

Friday, July 18, 2014

Dow Chart II

Dow had the failed breakout and sharp move back inside the current pattern on the Daily chart with heavy volume yesterday.  I have highlighted the failed breakout with the blue oval.  Notice the lower sub graph of volume, although this has been nothing new in Equities in the days of QEternity.

Interesting to note how the Hourly chart saw the Dow get rejected at rising resistance.  For now the Dow is in a zone of chopfest/noise.  But there was a high reward to risk ratio short trade yesterday, and those have been almost extinct the past few years.  More to come on the Dow in the coming days.

(Click on chart to expand)

Tuesday, July 15, 2014

Dow Chart

Like the other major Equity Indexes the Dow Futures Chart is dominated with poor Bullish Volume (green) on the lower Sub-Graph compared to the Bearish Volume in red.  Now we have an interesting pattern in the Dow since early June with three points of contact on the Daily chart for both support and resistance trendlines in this time period.  If there is a failed break and reversal back inside the constricting trendlines it could set up a large reward to risk ratio. 

Friday, July 4, 2014

The dichotomy in Volume to Price in the Nasdaq 100 is jaw dropping

This chart pattern to me is unfathomable as I see it, but in the day of QEternity anything is possible.  The Volume in the Nasdaq 100 has been below average nearly every day for the last six weeks as the index is in a moonshot launch type mode.  The 50 period simple moving average volume traded in a day over that time period is down nearly 100,000 contracts.    

(Click on chart to expand)

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Tuesday, July 1, 2014

Silver is at a key reference area to trade from

Silver is at a significant trendline here on the Daily chart.  In my opinion the Bulls would rather see that recent above average Volume expanding on a breakout rather than coming into resistance. 

Saturday, June 7, 2014

Equities futures break resistance. What I will pay attention to in the Charts now.

This is a follow up on yesterday's post outlining the key chart developments here.  Well the shorts must be nervous going into the weekend as the Russell 2000 and S&P 500 broke out from minor resistance in the Daily timeframe and closed near top tick on the session.  Volume was down from the previous day.  A Monday bearish day and close back beneath these trendlines with increasing Volume might set up an opportunity for a near term reversal and an entry to go short with well defined risk above the swing.  In the meantime the trend might be up near term so those sitting with a losing short from down below and praying is one really bad spot to be in as it usually leads to pain when holding onto the wrong side of a breakout.

(Click on charts to expand)

S&P 500 (ES) - Notice the Volume Moving Average which has been going south while the market goes parabolic here.

Russell 2000 (TF)

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