Thursday, March 12, 2009

For Future Reference


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I've had a bunch of small 1 to 2 pt losses in ES that added up to some frustation, and with today being rollover day, it caused my charts to load up strange (indicators are wacked), so I will take that as a sign to take a break, and post some charts to help me to internalize some important points to remember.

The above chart was Tues Mar 10/09. ES had run up +10pts in the overnight session, retraced a bit, then ran for another 10pts in the first 45min. of the session. Around the 7am reversal time, it paused again, this time forming a box play pattern. Going long after a 20pt run-up typically is not a recipe for success, so that just emphasizes how reliable this box play pattern is.
In this particular case, there was a retrace after the intial breakout of the box. So one would have needed a 2.5pt - 3pt stop (705.5 - 705), reward being at least 4pt target (712). To increase the profit potential, one could add to the position on the second break above 708.

Normally a series of lower lows makes for a good candidate to go short. However, this was a downtrend after the monster +42pt gap and run-up in the previous session. Shorts get a little antsy about a +42pt run-up, and when market gapped up, the first TICK retracement was a chance for the shorts to cover on the gap fill attempt. Selling accelerated on the break below 725 to confirm TICK retrace. Any reversal close to the gap fill level (716) would be a good long entry. In this case, ES ran 10pts from the reversal. If one missed the initial reversal, a break of the downtrend line presents a good second long opp.

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