Posts Tagged ‘Rising Wedge’

Day Trading with Support and Resistance

Thursday, March 4th, 2010

Today is Wednesday March 3rd and the S&P futures put in a small gain for the day.

The market was virtually flat today and off its highs, closing closer to its low for the session. The short term momentum has been lost with the hourly chart just about to turn down. The daily chart is still holding it momentum edge, but time will tell how it fares going forward.

You can see in the chart I have below, that there is containment taking place in the Dow and it is holding the other index’s back. We may see prices stay inside of the Dow formation until a clear break out is again present. That break out can come in bullish or bearish fashion and does represent a good longer term trading opportunity. For day traders, that may mean two to three days. So, the thing to do is watch how prices handle the edges of that formation. Until then, you could see some consolidation inside the range.

The Dow has shown resistance 9 days, as the red line across the top has proven itself to be clear “TRADING RESISTANCE” overhead. As the bottoms of the chart move up, you have what is called a “Rising Wedge” in a downtrend.

I would have to call the current position of the overall market in a downtrend. The weekly chart is clearly down, with the daily charts trading counter trend to that. Even if the current pattern were to move all the way back up to the old high, you would put in a classic double top, at which time would be met with selling. All the people who wish that they got out at the previous high, will not miss there second chance and have there finger on the trigger.

For those who follow daily charts in stocks and options, this is where you want to watch volume. If the volume is weak as prices rise, that is a pretty good indication that the market is rotating into weak hands and more susceptible to a drop. I just looked at some of the volume figures for the S&P and it at this point it does look like the big up days were on lighter volume and the larger volume days saw little directional movement. In addition, the four big sell off days, (2 & 2) came on very large volume. That is typical for this type of move. With that said, the market can still move higher, if it breaks out of the over head resistance area, but it is possible that it will only be short lived if it does.

All of these issues are taken into consideration when understanding support and resistance. Looking at price structure with support and resistance in mind, will bring a clearer picture for where we go from here.

We had a few nice days up and I would have to say the move that I was looking for is complete. We may move higher, but not until the Dow can break out over the resistance area mentioned.

On another note; I came back from the S.F Bay Area to Northern Cal (close to Oregon) last night. I got caught in a snow storm with “white out” conditions, wow, that was not fun. I was exhausted when I got home. No time to update my blog.

Yesterday I did trade for just a few minutes and took only one trade. I did something from the day before that I don’t usually do. I carried one of the three contracts over into yesterdays session and sold near the high of the day. I took one trade for one point and hit it. When I closed it out, it took the “first in – first out” approach, so the new position had one left over. My stop was hit before the market could turn the corner, which was fine for a 6.50 gain from yesterday.

Today, I had one of those off days. I think driving white knuckled for so long, must have had an impact on me. I just did not have good judgment today. My first trade was a small gain, but I had three losses in a row and stopped. I was down about 2.75 point and could have taken another trade or two to try and come back, but I could see I was not thinking clearly and packed it in. I did not even feel like trading, so I thought, why push it. That is a good lesson for me. If I don’t think I am firing on all eight cylinders, take a day off. There is no rule that says you have to trade.

Well, that is it for tonight, I will have more to say tomorrow as we get new developments.

Good Trading to all.

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Market Sentiment Turns More Bullish – Trader Beware !

Friday, January 15th, 2010

Today is Thursday January 14th, and we have some new developments in sentiment to report.

As you know, I have watched the market sentiment numbers pretty closely and it has not given an extreme reading since the March lows. One side of the market is at an extreme reading now and has been there for several weeks now, but the most important numbers to watch is the bullish readings.

Currently, after having come off substantially the week before, the numbers came all the way back and then some. I am very confident that when these numbers reach an extreme, you had better hold on, because the volume and market volatility is going to come back and it will not likely be to the upside. We may still have some to go.

Currently the bullish numbers are at 53.4% up 5.1%.  That is a big move for one week. The bearish numbers are at 15.9%. This is a 9 year high, as best as I can see. It was not until back in 2001 that so few people were bearish. What do you think that is saying? Well, let me interpret. The majority is never right for very long, lets just leave it like that.

These numbers work in the opposite direction. Isn’t that strange? If you understand how Trading Price Action works, you would think it is really quite normal. The market takes you up, so that it can take you down and visa versa.

It is possible that we could see numbers as high as 60%. If we do, that is a super strong reading. Anything over 55% is considered the danger zone for a Major Turing Point and it could be coming soon.

We are in a Rising Wedge on the S&P 500 Index and if it gets broken, there is a statistical percentage that the market is going to go down with some significance. That is just how it is and how it works. We are in a pressure cooker, that is for sure and I can see it as plain as day. There are so many action points for traders when the market starts to roll over. Let me put it another way, we all know about the game of domino’s, right. OK, we keep setting up domino’s with each passing day and week and month go by. The longer this rally continues, the more painful it will be for those caught in the down draft to adjust themself and their portfolio.

I don’t have any answers, but, this is what I saw happening 9 months ago. We were going to trade back up to the middle of the range and at some point, the dam would break. We all had better stay clear of the path of the water and make preparations. If it does not happen, that is great, but I know of no other way to work off the excess optimism other than a decline.

We may have more to go to the upside  and that would be a good thing for others to get a better price as they prepare to sell into strength. OK, that is it for now on that. I was a little surprised that the numbers snapped back so strong. Wait and see for now.  

I will have to take a rain check on the post I mentioned about yesterday, Fear and Greed. It is a topic I will share my thoughts on in more detail. I will try to put it out in tomorrow’s post so it could make for interesting reading over the weekend.

Todays trading, was OK, but back to very slow trading. At 12 pm West Coast, there was just 1 million contracts traded. That was half of what Wednesdays volume was. There was some nice trades in the morning for anyone trading then, but mid day it got very boring and slow. I was still able to pick up my daily goal, without much trouble. I have a couple of video’s of the action below.

Until tomorrow, Good Trading !  

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Bullish Sentiment backs off- Room to Rally

Thursday, January 7th, 2010

Today is Thursday, January 7th and all is well on Wall Street.

I don’t look or watch much financial news, but I did see that the unemployment numbers are coming out tomorrow and there was some talk, good-bad-neutral. I did not really hear a consensus, but, based on some other numbers that I was waiting on, I would say that there is a good chance that we may have an upside surprise. I totally welcome it. It seems the sentiment numbers came out on Tuesday and just receiving them today, (2 day delay), says there is likely more room to the upside for the rally.

The numbers went the other way, a bit of a surprise, but just what we needed to keep the rally alive. We dropped down inside the 48 % Bullish figure (55%+ trigger point) and the bearish % came up 1.5% to a paltry 16.9%. The main numbers are the bullish numbers and they have pulled back down. That will give the market room to move up without causing an overly bullish bias. You want to see skepticism in a rising market. That is what really keeps it going. Once everyone feels to strongly one way or another, it’s usually lights out. So to recap, it does look like the rally will continue and the technical picture says the same thing as well.

The monthly, weekly, daily and 120 minute momentum on the S&P 500 cash, are all pointing up now and that should carry us over into tomorrows market.

Yesterday, I did mention that if 1130 on the S&P futures broke we could trade down to the 1120′ish level. It never made it that far and is a good thing. We were in a rising wedge pattern and in a up-trend, when that kind of pattern gets broken, you will usually see some type of selling movement at the break. We did get the selling, as the break happened, but it quickly got shored up. Later on, a test of that low successfully held and we were on our way back up to the highs for the day. That is exactly what you would like to see. The bear’s tried to take it down, but the bulls came in to shore it up and lead an advance to the high of the day. That is a good position, coming into tomorrows session.

I did not do any trading today, but I did post a video of the turning points in my “Scalp Trading” screen and you can see that below. These are short-term trades designed to capture small pieces of profit from the move. When I see a certain trade setup brewing that I like, I can click the screen to a different window set up, to take advantage of this condition, which can capture several points, instead of just a small scalp. Not all of these trades are gains, to be expected and I did not trade any of them today, in addition, you must know how to manage the trade after you put on an entry. All that said, these are still the turning points as the “Sniper Day Trading” method would give them. As of Monday, I will be back in full swing. I may take a few trades in Fridays session, but not sure, we will see.

I feel it is important to learn this type of trading, because you never know what the market will through at you and that would include, very slow, direction-less days with little movement to it. The market should  pick up considerably in volume, daily range and trade setups in tomorrows session and certainly Mondays. This is the time, that the institutional players will be coming back from there extended time off. It happens like this every year and so this is no exception.

That is it for now, a little tired and need some rest, so until tomorrow,

Good Trading !

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Important Market Update

Saturday, October 10th, 2009

Today is Saturday, October 10th and I have a few comments for this last weeks price action.

We had an interesting week, in that we had another yet larger pivot point established in the reversal back up, close to new highs. It would appear that with Thursdays strength,  overcoming the overhead resistance we have a good chance to hit the high side of the rising wedge that I had previously shown. Currently coming up to a double top in the major index’s, but I would expect at least a big push up to the 10,000 plus zone on the Dow and 1100 + zone for the S&P. This is very clear resistance in the charts. I believe we would have to have some amazing catalyst to push it past the upper range of the wedge. It is not likely it will go much past it, but you always have to see the possibility just in case.

I am going to give to two numbers. One for the Dow and one for the S&P. These numbers are what many traders are looking at and people who know how market rhythm tends to flow.  The numbers are: Dow- 10,320  S&P-  1120 . This is not a science but it is something to be aware of. A natural flow of market price action would be for the Index’s to retrace back to a 50% re-tracement at a minimum. This happened back in 1929, during the crash and it has happened countless times in various time frames through out individual stocks and market index’s. Back in 1929, the re-tracement took about 6 months. We went from 400 on the Dow to 200. Then over the next 6 months we pulled back up to 300 exactly, a 50% re-tracement. What happened after that, was the “death of a thousand cuts”. It was a slow painful process of declines that took the Dow down to a low of 40 on the index’s, a 90% decline from the top, over the next 3 years.

For me, it is hard to see a sustained move higher in the face of our current financial situation. There is no job growth, in fact it is going in the opposite direction, a first for a real recovery.  The dollar is coming under intense pressure. Japan, Middle east, China and others stated just last week that the medium for exchange in the oil market was going to be something other than the dollar, most likely the euro-dollar. That is going to hurt, badly. There is so many looming problems, but big ones, not small. The consumer is not spending, the driving force in our economy. The baby boomers are retiring, a very large group of our society by demographic’s, will not be spending big bucks, but just the opposite. In addition if so many are out of work, those people do not spend money.

The actual unemployment numbers are much higher than stated. Our fearless leaders thought it would be best if they don’t count the people who are out of work longer than one year. They just drop off the rolls. They may still be looking for a job but to no avail. Those people no longer exist, as far as unemployment is concerned. The real numbers are 17% unemployment, an off  the chart number and getting worse, as previously stated.  Bankrupcies are still rising, another off the chart category and credit card companies in an attempt to make more money have been jacking up interest rates on even there best customers to unheard of rates, 28 to 35 %. All of that extra money is being taken from them, snuffing out discretionary income. Looming problems, Cap & Trade,(government program)  if passed is going to suck buying power directly away from the consumer and pass it to the hands of government for the stated goal of saving the planet?, Really!  No comment.

The current debt of the country is “beyond belief”. Just this year, the annual deficit is in the Trillions, added to what is on the books. The Treasury auctions have not been going well and shadow entities have been buying these left over bonds so as not to create a panic by other foreign treasury holders. In fact, China has a current campaign to unload their treasuries back onto the open market, they are the largest holder of our debt, well over a Trillion $.

I don’t like reporting these problems and I know of many who would rather put it all out of their mind, what problems. Well, I feel a certain responsibility to at least point it out to my readers, as we get closer to this turning point that I have been talking about for 6 months. At the market low, in March, I initially called for a bottom in the market, followed by a sustained move higher after confirming signals were given. Since then, I have been saying that we were heading higher in a reactionary move from the March bottom. Well, we are getting real close. I did see the market sentiment turn more bullish last week. It jumped up to 50% plus.  A reading of 55% or greater usually is an excellent indication of a over optimistic public, signalling an eminent drop. We are not there yet, but as we approach the 50% re-tracement point for this whole move back up, a potenial turning point is fast approaching, beware.

Capital preservation is more important than capital appreciation right now. The public will never learn, they become the most bullish at market tops and the most bearish at market bottoms.  It is clear that “Greed & Fear”,  powerful emotions, are to often in control. But, for those who want to see the truth and choose to take the “blue pill” rather than the “red pill”, stand to fare much better overall. This is one, I would like to get wrong. I get no pleasure in sharing what I see, but I would rather know.

The stock market prices will only be reflecting what is going on 6 months in advance. At this time, economic reports have been coming in and some showing growth, but all short term stuff from government spending and stimulus, it won’t last forever.

Below are the turning points for Thursdays market. Traders make money in up and down markets and overall direction is not really important. Catching the turning points are.  The chart below is a tick chart of the S&P 500 futures market. Each increment of movement is called a “tick” and represents $12.50 when buying one contract. A contract is a leveraged agreement against the cash S&P500 market. Each day 1.5 to 2.5 million contracts are traded by a variety of people. Buying or selling one of these contracts and capturing 3 or 4 ticks of this movement at a time in a few moments, while risking 3 or 4 ticks, a 1 to 1 ratio, is just one type of order we place at Sniper Day Trading. The other type still only risks 3 or 4 ticks, but allows for the price to rise 8, 12 ticks or a whole lot more. Our indicators can tell us where to get out, but only after we have locked in partial profits at usually the 4 tick area or 1 S&P point. 

This type of trading is not for everyone, but if it appeals to you and want more information, send me an email and I could give you more information on my new reduced price for my trading program.

http://www.screencast.com/t/gN1tHUhw                Turning Points for Thursdays Market

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Daily chart of Dow Industrials with commentary

Wednesday, September 30th, 2009

Today is Tuesday September 29th and we had a consolidation day today. There was not a lot of movement during the day, other than marking some time and drifting sideways. That actually serves a purpose, in that it can bring in rotation. What I mean by that is, weak hands are getting out while stronger hands are getting in.  With this move as extended as it is, others would call the late comers as, Johnny come lately.   These are the people who are just now convinced that the rally could be for real and they want in.

There is still room to the upside but it is getting squeezed by some strong overhead resistance on the daily chart. As time is moving forward, the momentum is slowing. The resistance overhead on the Dow has hit an upward sloping line eight times and each time it has been met with a move off of that area. This one is very clear on the daily chart. The bottoms have been rising at a faster pace but not by a whole lot. What is developing is called a rising wedge and this happens to be in a up-trend. Do you know what happens when you have a pattern like this? What is the next move when the pattern is broken? Well, the pattern is by no means broken yet, and from the looks of it, has a little more room to the upside, but not much. Looks like 10,000 will be a likely target for the upside, something I have been saying for a while.

The bottom of the rising wedge would put it at around 9300, but that would be if it just fell off a cliff and went straight down, not to likely, but that is where support comes in at the bottom of the pattern. It will likely bounce at least once off of that level once it gets there and it will get there, that is for sure. As time passes, the support level will rise, eventually choking off the low, until it is broken. The tops have found resistence at a slower or lower trajectory and what you get is a rising wedge.

When it is all said and done, the pattern will break and at that break, you can expect at the very best case scenario, a move back down to the middle of the march rally. The low on the Dow was around 6500 and let us assume that the high is going to be 10,000 so a move to around 7900 will bring it to a little more than a 50% retracement. That will be the best case scenario. That will take place when the lower support is broken and again that is currently as around 9300 and rising.

I did just see another rising wedge in the context of the bigger rising wedge that I have been just discussing. That is inside the upper leg of the current move we are now in. Is is getting squeezed and has bounced off of that level with yesterdays low of 9640. So that is the where we are right now. If this small rising wedge gets broken to the downside it is going to more than likely move over and or down to the lower rising wedge that I had been discussing above.  That is the major support for the whole move.

With all the talk, I will now have to post a chart of what I am saying so that you can see now with your eyes what I am saying in words. So check below the Dow chart and see the notes that I have made on it to see if any of that makes any sense to you, hopefully it does.

The bullish sentiment is down to 46% and that is 1% lower from last week. This is going in the right direction and allows for more room on the upside for the bulls if they can muster it. A reading of 55% is considered extreme and we are well off of that right now. It is interesting to see what will happen. I will leave the possibility open that the upper line that I discussed where the resistance was coming in at multiple times, that is that can get broken to the upside, then you may have a new pattern that could form and that would a parallel channel. The lower yellow line will become exactly parallel to the new location directly on top of the highest peak. We can look at that if and when the time comes. We have plenty on the plate to watch and see develope.

Thats it for now.

 http://www.screencast.com/t/WAe6CAPyqO               Daily chart of the Dow

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Scalping the S&P 500 for Daily Profit

Thursday, September 24th, 2009

Today is Thursday September 24th and all the major index’s had follow through on yesterday’s sell off.

We had mentioned that if there was follow through it could be telling us something. I do see a rising wedge in this up-trend developing, but has not broken as of yet. There is support at just under today’s low and I think this level is really going to be important to hold. This sell off is and can be expected, given that we had this big run. There is some resistance above and as stated some support below. I would be surprised if we go right through support from here. I don’t think that is going to happen. I would expect a day or two of consolidation at or around these levels and a counter trend rally, just like I mentioned earlier in the week. You usually will get a counter rally back up and at that point, the make or break point will be at hand. It is still developing and will need to see the move back up to better determine what is actually going to happen. Still can not rule out higher prices. Dow 10,000 and S&P 1100 are not far away.

I had mentioned the sentiment had been falling and that can be a good thing for the bulls. After this weeks price action, the bears will make an even stronger case for the market to drop, thinking that this must be the drop that everyone was waiting for. I am a firm believer to always look at both sides of the market and that way you will not get blinded by what you want to see happen or your preconceived opinions of market direction. Wall Street is a two way street and right now, the flow of overall traffic is still going one way. Yes we have pulled back quite a bit, but the price action is not decisive enough to warrant an all out sell. We bounced off of some stiff resistance and appear to be pulling back. Lets just watch the price action over the next few days and the bigger picture will become more clear.

Below is a short video of some of the trades I took in the S&P. These trades are out of the 100 tick chart and is by any measure a fast pass chart of price action. I look to two higher time frame charts as well but those are not mentioned or shown. It’s all about timing. When to pull the trigger and when not to. If your timing is good and you  have a road map to follow, you can do well. If you timing is off and you can not follow a clear plan of action then you most certainly will not do well. It’s just that simple. How do you know where to get in and out?  That is explained in my method in detail. Below, I have taken 15 trades in the last 90 minutes of trading and posted 54 ticks of profit and 15 gains, with one loss of -3 ticks. I show exactly where I get in and out but do not explain why and do not show any of the other parts of the method. We only need 8 ticks to capture 2 points for the day.  It can usually be had in about 30 minutes of trading everyday. If you are able to slowly increase your contract size while trading for a very conservative daily goal of 2 points, you will never worry about money again.

It is not that hard to learn, but the hard part is going to be dealing with yourself and the inevitable fear and greed which always comes into the picture when you have large sums of money at stake. There are things traders can do to overcome these obstacles, but very few ever think of what that is and even fewer are willing to do what is necessary even if they find out, what they should be doing to get to that level.

All I say is, it is possible, if you have the support and road map. I can offer both, for those who are interested. I will be coming out soon with a more favorable pricing structure for those interested that includes a much lower initial cost to get started. It should be up and posted in a couple of weeks. I am working hard on putting everything else a trader will need to get and meet there goals. It is and will be different than any other method or system out there, so stay turned.

Vince

http://www.screencast.com/t/15cxliWCm7g         video of todays trades and turning points together/ 100 tick chart

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Target Call Complete, with 940+ On Today’s S&P

Tuesday, June 2nd, 2009

Today is Monday June 1st and the markets had a big day, completing the call made 5 weeks ago.

There must have been news out to move the markets in a sustained push to the top of the range. The market jumped on the open to catch up with the future market which had extended its move from Friday’s late push up.

Since the open of pre-market on Sunday afternoon, other than an initial dip, it’s been up and away since then. The Dow closed up 221 points and the S&P plus 23 points. Usually there is a 10 to 1 ratio from Dow to S&P points.

Well, this move does not surprise me in the least. We were pushing up over every significant pivot point with the last one at around 880 and holding. With today’s action up, that takes us right to the upside target I had called for at 940 five weeks ago.  Initially, we came up a  little shy on the previous rally, (930) , but with today’s finish, I would call the target of 940 on the S&P complete.

Where do we go from here?  There is resistance just above this number and we will have to see how the market handles its recent gains. If it can consolidate at these levels, that would be good. But it is going to take a lot of buying power to get it over this level. Sideways to slightly down would be normal price action from here, but take it as it comes and trade accordingly.

In today’s action, I traded very small initially on the open. I missed a couple of nice moves in the direction of the predominant trend but other opportunities presented themselves soon enough. I did have a slight bias short, which I really don’t like, but as the day moved on there were trades in both directions.

I do prefer to see trades in both directions when I am scalping for small targets, but when you get strong directional moves like today, it can pay to wait. That was another reason I traded small. I knew there was going to be a gap opening and prices can tend to be erratic until the futures and cash markets come back together. It was in that rejoining that a nice continuation pattern developed about 5 minutes after the open and turned out to be a real nice move.

I wanted to trade for small targets today, after last week going for bigger point gainers, which did work out that well when all was said and done for the week.

After the grind higher in today’s action, I saw what looked like the top of the move and at 11:06 a.m. went short, as it bounced around above and below my entry for just a moment, until it fell  for a 6 and 7 point gainer right to bottom where I covered. That was nice to be able to see the pattern and formation developing.

Earlier there was a rising wedge that developed, but it only had a small retracement to it. The upside resistance area continued to keep a hold on the move up, while the bottoms moved up more quickly, forming an even larger rising wedge, I saw it coming together and waited for it to come to me. That is how I like to play the bigger moves. Tomorrow I will look to start out with the small targets contract size until we see what the market is saying.  I will show some of my trades taken in tomorrow’s session.

Since I started trading on the open earlier in the day, I had noticed that I was not as sharp as I was when starting later in the session. It has been an adjustment for me getting up earlier, still not sure I am there yet. Getting up at 5:30 am has not been easy, I am trying to get my mind clicking on all its cylinders before the open. Trading with smaller contract size can take the pressure off, because with only a small downside daily loss stop, you can run into it quickly.

It should work out fine over the next couple of weeks. Another issue was trying to run two screens on one computer while I had so many other applications running. Last week there were missed opportunities for me, but others in my group were able to capture their points without much problem.

That is all for now, we will see what tomorrow brings and go from there.

http://www.screencast.com/t/A3sYdPZj Today’ equity chart

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