'No indicators' revisited

[china white]

mate i have to apologise - i vaguely remember u asked me something which i had no time to respond to and obviously it all fell into oblivion was it what u were after? or was there something else that i do not remember? sorry mate

 

[clylbw]

Overnight gap play

Hi,

I have been considering overnight gap plays in NQ. You may have noted that futures gap up or down when the market opens, normally due to some significant news. In some choppy days, the opening gap can be the largest movement of the day. Thus, it can be very profitable to hold futures overnight in anticipation of the opening gap. However, it can also be very dangerous, at least to me, as I cannot be sure about the direction of the opening gap the following day. For example, if I had gone long towards the end of one day's trading section expecting some good news, and the actual news were unfavourable, the futures could gap down during the open, which could incur a great loss to me.

As china has clearly pointed out, sometimes you can tell the big boys are buying or selling towards the market close; I take such actions as indicating that they are anticipating a gap in the open the next day. Suppose there is some heavy-weight economic news due tomorrow, and the big boys are clearly buying towards the end of today's section. Under such circumstances, will it be a good idea to hold the futures overnight as the big boys seem to do?If so, what measures should I take to limit the potential loss?

Many thanks indeed.

 

[clylbw]

Hi china,

That was not exactly what I was looking for, but it solved my problems by providing more information for interpreting price and volume. Thanks.

 

[china white]

mate fire away any Qs u may have. it was a long road for me, and now that i do not need indicator "glasses" to see things clearly, i think it's my obligation to help the others probably Catholic guilt for being a social parasite (well we traders r social parasites rnt we? )

 

[clylbw]

To be frank, I am never good at indicators; I always found them too slow or too fast. I knew it was my own problem and the indicators-lead trading methods were clearly not for me.

Thus you can imagine my joy when I came across this thread. I immediately knew that this was exactly what I was looking for. It was like coming home.

I would like to take the opportunity to thank all of the Dark Siders who have contributed. I am profoundly grateful to you.

 

[china white]

i second that.... for 100th time. another 1000 thanks coming

 

[SOCRATES]

Overnight Gap Plays

Overnight gap plays as you call them are potentially very dangerous.
In my view if you are at the stage of asking questions about them
you should not even consider such a strategy.

 

[china white]

let me step in - my strong advice is to follow what Socrates said and drop even CONSIDERING such a strategy. Unless of coz u have really deep pockets and u want to learn getting burnt the hard way. Even if that is the case, u will have better use for your money betting on Becks being the top scorer in Euro 2004 sorry if i sound harsh but that is the way the mrkt works.

do not take me wrong - i am not saying u shud never trade after-hours. But u need to be awake and in control of your trading after hours - otherwise it is worse than gambling IMHO.

 

[china white]

mate i apologise for sounding harsh. i will tell u what gap play is from my battle log

2 identical cases - tomorrow is the big announcement for Applied Mats and Texas Nutters (AMAT.O and TXN.N).

volatility curve is parallel shifted upwards in anticipation of the big news for both issues.

the way i played the gap (expected) was to buy a 95%-105% strangle and sell ATM straddles on both issues.

big move - u move from the short strike anyway which is always good towards long strikes. On a big move u clock up gamma on the wings, lose on the volatility collapsing on the wings, and win on the volatility collapsing where u r short volatility.

nothing happens - your wings are useless, u get theta and short vol profit on being short the ATM straddle.

In that particular example, TXN was flat, AMAT moved 9%.

Now tell me to test yourself - what is my worst case scenario? U know there is no free lunch - there must be a scenario where u lose

 

[clylbw]

Hi SOCRATES & china,

Thanks for your information.

 

[barjon]

Socrates

Well here's my attempt at a bit of darksiding today.

I know ftse volume is suspect and it's not directly traded but that's what I was watching all day.

ps: the last para should start - At 4 (not at 3)

 

[neil]

Max Bygraves tells you a story

Not a bad attempt.

The volume bar to the right of your red dots are what tell you a story - the first vol. bar to the right of your first red dot shows a higher high on very low volume - the stuff the herd feeds on in the hope of more rising prices...your second red dot shows an abondoned ship. 3rd red dot and subsequent bars show a reluctance to power past 4455 ish.

Now you work out what the vol. bars on the right plus shortened candle bodies tell you about that price level and what is going on behind the scenes

 

[Rognvald]

Agreement on price by and large and accumulation of positionsabout support level at circa 4455?

 

[SOCRATES]

Dear Barjon,

I refer you to my posts of today numbers1024 and 1034, above.
I asked you to do some "homework" on these postings. Have you done it ?
What conlusions have you arrived at ?
Have you had any realistions ?
Because without arriving at conclusions and having realisations you cannot progress.
I am interested to hear as I put up these posts specially for your benefit.


Your chart above.

I dont know what the instrument is and it does not interest me.
The story starts with candle number 6. This is a white candle with shaven head which appears to be just marginally gapped up and the volume is higher.

(This has been done to probably deal with congestion to the left ~ you see the vol is very low on bars
12345 ~ this gives us the "clue" that to the left there are trapped holders who have been sucked in to
buy at higher prices and are locked in.)

There is very little activity because they are all waiting for something to happen ~ either for their stops to
be triggered or for a rise. They are hoping that the price may go SIGNIFICANTLY HIGHER so that they can all get out at a profit.

The rise in bar 6 now encourages these locked in holders to start liquidating long positions.
This continues with bar 7. The volume for these two bars is not causative, it is obvious that it is
consequential.

Now what happens is that as a result of the market not being at its strongest, this strength is being sapped by sellers coming on to the market unloading stock or whatever it is at hi prices. This has the effect of temporarily halting the move.

I say temporarily because what develops next is very interesting.
Now the next bar, bar 8 is a blue bar. If the volume inn this bar were LOWER THAN the two previous bars this would be an indication of IMMEDIATE STRENGTH and the next few bars would go up like rockets.
But this does not happen.

What actually does happen is that bars 8 and 9 sink without significant alteration in volume.
And what is of further interest is that they don't sink any further.
This has got to be professional buying quietly absorbing the supply availabe in the hope of not being noticed and /or understood, but not at the highest price but at a lower price and not to low so as not to disturb the market.

Notice that the bars 8 and 9 and the ones that follow (10 - 17)now trickle sideways below the top on bar 7 and above the top shadow on bar 2. This is a mini campaignof short duration. This has got to be support, whilst the buying schedule is orchestrated to acquire whatever is available at this price range. Now observe that bars towards the end of this sideways mini accumulation phase that touch lower levels have not LOW VOLUME to underpin them.

This reluctance to go down after a top has to be reaccumulation, it has to be!
It cannot be anything different.

Suddenly in bar 19 the volume suddenly increases and the price moves up briskly.
The volumetric impulse is not huge because the herd is caught off guard. It is only when the herd REALISE that prices are moving up do they decide to join in.But they join in as weak holders and this may be too late and in the wrong place and at the wrong price level.

The next bar (blue)is on lo volume........Weakness ? Yes, this is confirmed by the little dogi as you call it, number 25.
And the next bar, 26, opens, does not lift, and begins to collapse.............
Definitely weakness coming in.

This is not resolved until midday. Midday is a propicious time for a quick snifter at the **** and Woolpack or the Admiral Nelson. (the male chicken and the woolpack if you please}
Weakness........definitely.....

Notice that there is volume at around the 4440 level. The volume diminishes as the price goes up.
What is available has been bought !
A last stab at what may be available is taken by bar 51 which is the one you mark 3 in red. This one has a deep bottom shadow and the volume is not low.

Now a second stab is taken in bar 52 and from then on it begins to climb again, bear in mind there is support at around 4440 and resistance at around 4456 or 4457 or thereabouts, because the previous top serves to cap.

Inevitably the process is repeated all over again leading again to weakness in the last 4 bars on the chart ~ hi voume bars closing in the middle or lower. This has to dip again before it can go up again, if at all.

That is why the price is taken to the first hi in bar 22 in the first place~ the volume underpinning it is high, not low.

 

[bracke]

SOCRATES

"This has to dip again before it can go up again, if at all."

I attach to-days chart of the same instrument. It does not appear to have dipped before it went up.

Would you care to comment please.

Regards

bracke

 

[SOCRATES]

SOCRATES

"This has to dip again before it can go up again, if at all."

I attach to-days chart of the same instrument. It does not appear to have dipped before it went up.

Would you care to comment please.

Regards

bracke

Yes, it is quite simple really.

Looking at what continues from the last price action, you remember was a combination of
hi vol and bars repeatedly on narrow spreads closing in the middle or thereabouts.

It now turns out that by just doing the above that was enough to make the herd nervous,
and to persuade them to be prudent and for them to tighten up their stops. Of course the
consequence of tightened stops is that they are easily hit.

To put it in plain laguage this is accumulation that has turned out easier than anticipated,
that is why there is no need to dip the price down any further in order to achieve the desired
result.

This is sufficient "ammunition" if you like to carry on. Observe that the first few bars in the chart are narrow spreads also but the vol is lo. This is because the use of time has been changed, i.e., it has temporarily become a waiting game to see if more can be acquired without disturbing the market unduly by lowering prices drastically to encourage the herd to part with any more.

Aa this ploy does not succeed,now the use of time is altered and more urgency given to the objective, i.e., to take the price up during distribution. Here the vol changes from being consequential to being causative. Prices go up and up in steps from then on as the herd become converted to a bullish posture.

Now the tilt is northerly. No one is interested in lower prices except to buy more ~ opportunities
to do so become more and more scarce and prices continue to rise.

Do you see or not see ?

 

[Trader333]

Short SOTR at $34.80

Paul

 

[Trader333]

Covered half at $34.61 for +19

 

[Trader333]

Darktone,

Oh dear, I was just trying to provide what a few people asked for and then the darksiders could begin later.


Paul

 

[Trader333]

Just closed the second half at $34.65 because I want to watch the match ( a weak excuse I know). I will post and comment later on how I saw things up to that point.


Paul