S/R and the Mirror of Erised

[erierambler]

(I do still use the AVDVd. As an "indicator", it's practically foolproof. But I more often look at the DV when nearing S and the AV when nearing R)

Something I will add, thanks.

erie

 

[dbphoenix]

No not at all. The adv-decl diff I keep in a spreadsheet, along with price and adv/decl issue statistics. (I also have a note that price diverged from the $XMI that day.)

erie

This is pretty much what I would have done, except that I would have extended your 1280 line all the way back through that diamond-shaped congestion to emphasize its importance (or, at least, its tentative importance). I would also have extended the line below it back to the open since it's hit twice more. I would also have added a line at 77.5 since that's where price was halted at that day's open, affirmed by the SP low at 1300.

What do you see re the 1282.5 line?

 

[erierambler]

What do you see re the 1282.5 line?

Potential resistance.

erie

 

[dbphoenix]

Potential resistance.

erie

Buy why 82.5? You have a series of three higher highs through that level. Is it just that price failed to hold above it?

 

[erierambler]

But why 82.5? You have a series of three higher highs through that level. Is it just that price failed to hold above it?

Failed is the correct word. Price went below opening price after.(now I see why you would also put a line in at 1277.5, duh) And the low of 1272.5 would be potential support.

erie

 

[dbphoenix]

Failed is the correct word. Price went below opening price after.(now I see why you would also put a line in at 1277.5, duh) And the low of 1272.5 would be potential support.

erie

Interesting. And all of this is confirmed later in the day on the 10th.

But that's later. So the ES opens at 78. Do you plan to go long if your 80.5 line is crossed and short if price drops below 78? Or do you sit back for a while to see where price finds S/R on the new day?

(One of the reasons I'm not comfortable with ES is that the S/R ranges can be so tight; that's why, in this case, I would have chosen 80.5 and 77.5, especially after the open.)

 

[erierambler]

Interesting. And all of this is confirmed later in the day on the 10th.

But that's later. So the ES opens at 78. Do you plan to go long if your 80.5 line is crossed and short if price drops below 78? Or do you sit back for a while to see where price finds S/R on the new day?

(One of the reasons I'm not comfortable with ES is that the S/R ranges can be so tight; that's why, in this case, I would have chosen 80.5 and 77.5, especially after the open.)

Well I would sit back and wait. Price found R at 1282 and S at 1272.5 , with most of the volume at 1276 (some at 1279-80).

erie

 

[dbphoenix]

Well I would sit back and wait. Price found R at 1282 and S at 1272.5 , with most of the volume at 1276 (some at 1279-80).

erie

So rather than trade intraday, you're waiting for price to exceed the limits of the 7th, one way or the other?

 

[erierambler]

So rather than trade intraday, you're waiting for price to exceed the limits of the 7th, one way or the other?

Yes, that 's right. And on the next day I get stopped out.

erie

 

[dbphoenix]

Yes, that 's right. And on the next day I get stopped out.

erie

Yeah, that's why I prefer to daytrade the futures and "swing" trade the Q.

I take it you then shorted the bottom of the 11th?

 

[erierambler]

Yeah, that's why I prefer to daytrade the futures and "swing" trade the Q.

I take it you then shorted the bottom of the 11th?

You got it. Being stopped out is not that bad though. I'm practicing to get to daytrading, in no hurry at all.
erie

 

[erierambler]

If I was to look at your charts for the NQ, for the 7th , you would have R at 1560 and S at 1550?

erie

 

[dbphoenix]

If I was to look at your charts for the NQ, for the 7th , you would have R at 1560 and S at 1550?

erie

The chart for the 7th is the first chart shown in post #1, after the four stacked "context" charts. I show R at 1555 and S at 1550. Granted that's tight, but R at 1555 seemed pretty definite, starting with that little congestion pre-market, then those three tests before moving up on its way to 1560 and beyond.

Fortunately, the market opened between these two lines, so I was good to go. If it had opened above 1555, I would have drawn a new R line around 1560-61. I look for those levels that are repeatedly tested whether they are within the day's range or not. Back in the days when the ADR was twice what it is now, one could afford the luxury of breaking breaks above or below the PD's range. However, nowadays, by the time the price has reached a point where it can break out, it's often out of gas.

In this case, price broke above 55, but only made it as far as 57.5 (next chart). I didn't see anything special about that level, but it coincided with a swing low from the PD, so I drew that line in. Price then tested the opening low, then back to that new R line, then the opening low again.

As it turned out, it dropped a grand total of three points, which is how far it had to go to reach the level of that consolidation from the PD, right before the close, giving me another possible S level, which takes us to the next chart.

Point is, one has to re-evaluate S/R at the open, after the open, and throughout the day unless he is going to limit himself to buying a break above the PDH or shorting a break below the PDL. And that hasn't worked for me. On the other hand, I don't want to buy and short every little twist and turn, either. Which is where S/R comes in.

It's really not that much different for you except that the amount of information within each "bar" is more for you than for me. This gives you choices other than buying the top of the bar or shorting the bottom. You could, for example, make use of your intraday charts -- such as the one you posted -- to enter at R rather than wait for the bottom of the bar to be broken. In your case, you could have shorted just below 82.5 (R from the 7th) on the 10th and been ahead of the game. Even if you'd been SO, the stop would have been a lot tighter, and you'd have been out at BE (and since the high on the 11th was 82.25, at least during RTH, you might not have been SO at all, but that's more trade management than trade tactics).

Do you have replay, by any chance?

 

[erierambler]

Do you have replay, by any chance?

Yes , I have Esignal , which has replay. Thanks for your explanation .

erie

 

[dbphoenix]

Yes , I have Esignal , which has replay. Thanks for your explanation .

erie

Replay comes in real handy for testing and for practice. If you want to practice daytrading, go back to a week you don't remember, maybe mid-June or early May, and lay out your S/R lines for some Friday like you did on the chart you posted earlier. Then begin the replay on the following Monday. This will enable you to see how the S/R works out in real time. It will also enable you to plot new S/R as it comes up during the trading day (usually the first hour or so), such as I did with the charts I posted at the beginning of the thread.

 

[erierambler]

Replay comes in real handy for testing and for practice. If you want to practice daytrading, go back to a week you don't remember, maybe mid-June or early May, and lay out your S/R lines for some Friday like you did on the chart you posted earlier. Then begin the replay on the following Monday. This will enable you to see how the S/R works out in real time. It will also enable you to plot new S/R as it comes up during the trading day (usually the first hour or so), such as I did with the charts I posted at the beginning of the thread.

Yes, that is one reason (replay) out of many reasons why I have Esignal. ( not a recommendation for others, it just works for me, for now )

erie

 

[firewalker99]

an attempt at drawing S/R...

I've opened my own journal, but as this is a thread purely about S/R, I'll put it in here.
Don't shoot me for being wrong. I think a great deal of my trading fails because of assuming a support/resistance zone where there isn't one...

 

[firewalker99]

Replay comes in real handy for testing and for practice. If you want to practice daytrading, go back to a week you don't remember, maybe mid-June or early May, and lay out your S/R lines for some Friday like you did on the chart you posted earlier. Then begin the replay on the following Monday. This will enable you to see how the S/R works out in real time. It will also enable you to plot new S/R as it comes up during the trading day (usually the first hour or so), such as I did with the charts I posted at the beginning of the thread.

So if I'm correctly, you wait the first hour to see where S/R finds it's way?
You don't look back at let's say yesterday, last week to draw previous S/R on today's chart?

 

[dbphoenix]

So if I'm correctly, you wait the first hour to see where S/R finds it's way?
You don't look back at let's say yesterday, last week to draw previous S/R on today's chart?

No, as I said in what you quoted, go back to the previous Friday and lay out the S/R lines that you'll watch for the following Monday. Or go back to some other day if you're beginning with something other than Monday. Then modify what you hypothesized would be S/R with what actually turns out to be S/R. If you're good at it, they'll likely be the same. If they aren't, then be willing to use what you see and not what you thought you'd see.

As an exercise in this, let's play a game. Do you see any significance to any of the points I've numbered in your chart? If so, explain what significance you see, by number (don't feel stupid if you see significance in only a few). If the significance seems too obvious to mention, go ahead and mention it. There aren't any trick questions.

Db

 

[firewalker99]

As an exercise in this, let's play a game. Do you see any significance to any of the points I've numbered in your chart? If so, explain what significance you see, by number (don't feel stupid if you see significance in only a few). If the significance seems too obvious to mention, go ahead and mention it. There aren't any trick questions.

Db

Ok, there are a lot of points indicated, but I'll try my best:
The points left out (7,11, 14, 17, 19, 21, are those that I fail to say the significance or cannot give an explanation:


1: price has been at this point at touched it slightly before, and now it's formed a hammer

2: this is actually the point were I went long, I see a definite sign of strenght because of the up spike on high volume, althought I don't understand how the three following bars keep decreasing in volume

3: same high volume as previous top and above the previous high: Sign Of Strength

4: a test on high volume that closes in the upper half of the body: another sign of strength
but this one went quite low so it stopped me out of my second position

5: lower volume than on 3 but it closes high but I'd be doubting any previous signals

6: couple of bars, about same in spread, same in volume, but why at the top?

8: third time it reaches this kind of volume and a very large spread , I'd still be looking for a continuation of the uptrend

9: little test to see if sellers are still in the game, yes, so expect even higher prices

10: breaks through previous high easily, but slightly less volume

12: great volume, but fails to go up very far, bars close in middle, warning sign!

13: even lower volume and bar closes below middle, I'd short here (easy to say in hindsight)

15: if you mean the bar that touches my red line first, I would say the beginning of a small retracement on low volume

16: about as high as the bar indicated by 10-11 went?

18: around same volume as down bars earlier the day, so I would expect price to go all the way down, perhaps back to 5645

20: touching the line, and testing resistance, but why that kind of wide spread up bar to the left and quite a lot of volume in the other bars

22: upthrust, gave a go at another short here

23,24,25: I only see lower prices but none of the bars close below the middle... sign of strength