Day trading the DOW 14/04/03

[ChartMan]

Nice day today. Bit more than I wanted, but mustn't complain
Nice easy, if somewhat slow, 120 odd points in the bag, just sitting and watching paint dry.Long entry had several points following the opening double top and drop back to the 100MA line.Closing the long at the ND top might have gained you a few more points if you had the forsight to see that the top was not going to deliver, entering again at the 8300 bounce.
Note the entry clue towards the end of the long bull flag, the final low failing to make support by 50%. Note also the false breakout during that flag. The clue was that neither CCI or RSI broke above the down trend resistance line.
Final clue for the day, which was largely immaterial, was the failed "rolling top". Normally, one would expect the price to keep testing under the curve before finally tanking......This would also be under the 100MA.

 

[mags_g]

Phew !
And you had time to watch paint dry !
Each to their own method.

 

[ChartMan]

Perhaps that's a little over exaggerated. What I really meant was that at the end of the day, there were no nasty whipsaws or sideways wanderings to get you into a sweat. It's never easy, no matter how the day turns out.

 

[ChartMan]

Another nice trading day.Excellent TA clues to get the most out of what was on offer. Something I've never noticed before... The development of the first H&S. I noticed that there was a pullback on the first rise up. This pulback failed to reach target- Is this a common feature of an H&S? The rise was from 8310 to 8335. pulling back to 8327. This gave a target of 8352- just failed. If it was going to continue, it would have gone above by at least several points.... Although the H&S did make target, you should have picked up on the divergence in RSI, signalling a possible bottom.I know, It's easy with hind sight, but these are the things that should be going through you mind all the time..... If you shorted the H&S, you have to be looking for your "out". The target was 8220, nad after coming back off the bottom at 8210, the price bounced very nicely off the target line at 8320. This was your out signal.
The rest of the day is commented and should be self explanitory. Around 200 points on offer today.... long, short, long. Note the maximum move away from the 100MA in the bear flag was 11 points and the last part of the flag was accompanied by RSI divergence, suggesting confirmation that the flag would break to the downside.

 

[sidinuk]

hi Chartman, your commentary is excellent and most impressive. I wonder if you could just clarify something for me.

You say you would have shorted at about 11.50am (US) but then why did you not cover this short at about 12.35pm (US) when there is a small inverse head and shoulders (certainly RSI is rising)? It is not clear at this point that a bear flag is developing until more chart data is available.

Also there is divergence between price and RSI in the two tops later in the day (at 2.30pm and 3.00pm) why did you not cover the long and short this?

Thanks very much.

Tim

 

[ChartMan]

I can't argue with your observations, they are spot on. However, this analysis is designed for beginners who I presume will be using SB for trading.
So, for example, take your suggestion of covering the short at 17:35. One would have got around 8370. So what next? Do you get tempted by the higher high at 18:02? Maybe, maybe not, depending on whether you see the divergence in RSI... Do you see the bear flag? OK so you do. Your next entry is at 18:17, short. You would only get around 8370, so nothing gained........
Just remember that trading with hindsight will produce optimum trading. My analysis attempts to offer decisions based on what one may see at a given moment in time.The trading strategy is broadly based around making decisions wrt to price and the 100MA. KISS . Now we all know that the broader the strategy, the lower the profits, but with that comes lower risk. As one progresses in confidence and ability, I would expect people to make better decisions leading to increased profits. I, like anyone else, simply cannot see every opportunity for an exit or an entry. Hopefully, most can get in on the more significant moves ( not that you know at the time) and manage the trade to the best of their abilities. I want to show people how to do this and at the same time encourage self learning. My goal is to get beginners into winning ways quickly and get the most out of a move instead of panick closing or covering, only to see the move go another 100%. Making panick decisions could easily cost you 60 points in 3 bad trades.... I'm thinking of whipsaws/chasing the market, going long, then flipping because it goes against you, only to see it come right back at you, confirming your original choice. Add to that another reversal and with SB's your 60 down, a major headache and likely to do something even more stupid than you have already done. I'll tell you what that is..... doubling your stake in one last effort to get your losses back. Guess what? your'e now 120 down.........
We've all been there and done that. Of that I am sure.

 

[china white]

Chartman,

I completely agree! we've all been there and done that. many thanks again for your insights. I am sure they will save quite a few people some very nasty moments....

 

[zebra]

Hi Chartman,

Really enjoying this series, many thanks. One query, I can't find any glossary terms for ND, please enlighten, sorry to be a pain in the wotsit.

Zebra.

 

[ChartMan]

ND = Negative divergence- price up TA indicator down.
PD = Positive divergence- price down TA up.
You find PD at bottoms and ND's at tops. They usually span at LEAST 25 mins. plenty of info in the archives- a regular occurrence

 

[ChartMan]

Sorry, realy short one tonight- I've got a major cold. Cost me a lot of points too through not being able to concentrate. I must be mad (((
If you were skilful, you'd have got the 200 in one go....or even more in 3 goes if you took the early reversal.

 

[china white]

Chartman,

I traded yesterday a bit differently than by TA. When I switched on my radars at about 12:30 GMT I saw SP futures at 898, whilst FTSE had been on a constant slide since it'd opened, actually it was already in the red at that time. I had plenty of chances to notice that at such extreme points FTSE is usually a good precursor to US blue chips. I shorted DJI at 8458 before the open and just stayed short all day - lazy..... could have doubled at many points......

Mate I have a query for you though. STRICTLY from TA perspective, would not you go long Dow at about 15:30 GMT after it'd crossed MA and returned back to it? That'd be a costly decision.... What TA would help you notoce the abyss at that point in time?

 

[esiotrot]

CM - China White

I really caught a cold too on this one!!

I went short around 1515 on the pullback at the 100ma. It promptly went north and broke the 100ma + 20 stop so I got out -30.

Now I was looking for a long and did so on the pullback again to the 100ma. Whereupon it went south and Iwas out of pocket again!

Now waiting for a chance to get in again (a glutton for punishment) Around 1600 there was a nice positive divergance on CCI and RSI so I'm looking long again - but no!

By this time I had decided that i was out of phase with the market so I stopped trading. There may have been 150points there but I sure did not get any.

 

[china white]

esiotrot,

mate I do completely agree with TA traders that on "normal" days u should not be trading on the news. But on days like y'day, when the SP futures top above 900 on Globex, FTSE tanks along a straight line from the higher open etc. - u just go short and sit and wait, not joggling too much with TA. U bite my elbows I did not double my short - essentially at any point in time - on days like y'day it is just a 1 way road (until at least the last hour of trading).

 

[china white]

BTW lads I just noticed (a bit belatedly) u can c a clear bearish flag on the Dow 10-min chart developing over 2 sessions 14/4 and 15/4. Target 8100 I believe...

 

[LORD JAMLA]

C'mon Chartman my son, keep eeking them points out of the Dow. And stop entering the Dow comp cuz you keep stopping me winning. Personally, I'm starting to feel a bit of a bear. We could have another rise to 8,750, but certainly if she goes back to 8 5's I shall be puttin me summer shorts on. My fave stock of the mo SDR has just hit an absolutelt critical 6 squid level. This has been THE STRONGEST SHARE IN THE MARKET OVER THE LAST 2 MONTHS. I just sold my wad that I bought at 4.27, I expect it to fall, maybe back to a fiver. It's EW pattern is the clearest and best I have seen for many a moon.

 

[ChartMan]

China- no clear answer here BUT the move was preceded by an Inv. H&S whose target was 8400. It ONLY just made that, so waiting a couple of ticks would have confirmed the non continuance. Also, rallies off the 100 MA usually only have a small pullback to the 100MA before taking off. Sure, you can take a chance, and you may be right some of the time and get in early for big rewards. Playing safe will always take the break of the high AFTER the pullback. Clearly here, we didn't get that here.
Tortoise.... Take a closer look at your first short- nothing wrong with the entry, but your cover for - 30 must have been right at the peak- I make it exactly 100 MA +20. Here RSI was 70 , and it's not gonna rocket from there.....
Just a reminder about the points to RSI ratio, that move was 1:1 indicating no strength either way.Close call- great pity as it would have set you up for the day. I can't complain, as I said yesterday I screwed up just as bad.
Second point, corny I know, BUT the trend is you friend. Your second entry was AGAINST the 100 MA, trying to call a bottom- just like me. I saw the divergence too.......And we were bouncing off the previous flag target at 8320. A resonable gamble enrty.
As I have said many times, I try to instill "safe entries" as a strategy for profitable trading and that was not a "safe" long. I have to admit that I too suffer from impulsiveness at times, and I pay the penalty.
Today was a different story, taking an early 880 on ES and closing at 892.5 just before the close.That was at 15:00. I could have waited till 17:00, and taken the "safe entry" and still got the same........ Pays to wait? :cheesy:

China - I see the bear flag too and I think It'll go. Target 8500.

 

[ChartMan]

Please guys, tell me you got the triangle break. :cheesy:
Another easy day after this,taking the ride to the 3 peak ND top.Closing and going short would have gained some more points( almost none on SB), so long as you covered on the double bottom at 8300, just below the 100MA. Clearly there was horizontal support along 8300. Now there was an reverse triangle forming,( 8300 base and the ND trend line) and a rough guess(minimum) target was 8350- not quite met.
Getting in anywhere in the early session would have meant a long wait, the price never deviating outside the 100MA +/ 20 band. Going short , you should have covered immediately on the triangle breakout...... and then got on the right side. Easy afterwards, isn't it?