H&S Update in After Hours…
December 19, 2012 6:00 PM

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Here is ES H&S Pattern in after hours and how it worked out

Head and Shoulders Pattern with Market Context
December 19, 2012 4:33 PM

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Head and Shoulders Pattern with Market Context

Market Context is one of the most important concept traders should master before they start trading. Most traders have some concepts of Market Context… If price is above 50 EMA or 200-SMA and price is trading above Pivot or below Pivot etc. But solid understanding of Market Context makes traders confident in trades. Every trade I study and plan, I must clearly know what Market Context I am trading… I trade Price Patterns with Market Context. Market context validates, shows where entries and stops and where to place targets. If Market turns against the trade, I would even have a plan of where my theory fails.

Today afternoon around 1pm, I started seeing a Head and Shoulders Pattern develop in @ES. I started to notice CMI on 5m gave a sell signal about the same time. ES was trading around 1440. I started watching the market price action and wanted to trade below the Neckline of H&S at 1437. Another key element I noticed was today’s Opening Range and the First Hour Low was set at 1437.

This combination of level 1437 (Neckline, First Hour Low around Floor Pivot) gives me a strong H&S trade. I initiated a SHORT trade at 1437 with a STOP of 2.5 pts (1439.5). My Targets were set by measuing Head to Neckline. The fib. ratios of this length below Neckline sets my targets: 1431.5, 1430 and 1428.

About 30 minutes into my trade, ES traded below 1434 and reversed its trend and traded above my Short price. I have 2.5 pts STOP at 1439.5. ES traded at 1438.25 but again it reversed in my Short direction. I knew this time I wanted to close at least part of it around 1434 (+3 pt). Then I kept my next target at 1431.5 and moved my STOP to 1437. (B/E).

By the end of day, my next target was hit at 1431.5 (+5.5 pts) . My previous target gained (+3 pts). I think H&S will work further down overnight and trade below my exits (1431.5).

Two ABC Bullish Pattern Trades
December 17, 2012 6:12 PM

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Today was a great day with both ABC Bullish Patterns worked. Late in the trading around 3pm, second ABC Bullish pattern emerged. The second pattern is more stronger pattern than the first pattern. Today market Gap opened and traded higher most of the day. Second ABC was developing above Mid Fib. Band 200-SMA late day. This usually is strong case for its rally. I traded second ABC Bullish from 1418.5 to 1424.5. By close, ES traded even higher at 1428.5.
First ABC was described in the morning blog post.

Fib. Zone Pivots Update
December 17, 2012 12:06 PM

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ES traded in the Second Fib. Zone Pivots Range (1419.5 to 1421.25)

An Exercise in reading Market Context and ABC Bullish Pattern Trade
December 17, 2012 11:41 AM

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S&P Eminis (@ES) developed a Globex range (overnight) of 1409.25 to 1417.25 and started drifting lower at the open. At 9.30am, I was looking at ABC bullish pattern strongly trading over Mid Fib. Band and 200-SMA. Reached its first target 1416.25 (over night). I did not have this opportunity as it developed ABC pattern and reached 1st target overnight. Strong ABCs usually gives second opportunities from with strong market internals. One of the first reading I look is Market Context and where the ABC was developed and how current Pivots (Floor, Globex and Fib. Zone Pivots) are in relation to Fib. Bands and 200-SMA. This gives a pretty good idea of Market Context and how I should play. Also needed to look at Volatility to see it is safely tradable.

At the open 9.30am, ES started drifiting downwards and entered into the tradezone (EL to Stop) 1412 to 1409.25. Also, price seems to be strongly supported by VAH (Value Area High: 1411.75). Another context reading was, there was a small ABC (3) was developing inside the larger ABC (5) giving cluses of potential breakouts. This is an excellent trade setup. My plan was to wait until it trades at or supported by VAH (411.75) and then rises over pHI
(1413) and R1(1413) cluster. Smaller ABC entry was 1413.5. I also thought if ABC does pickup momentum, it will reach next Fib. Zone Pivots Ranges (100% Resistance area: 1416.75 and second FZP Resistance Zone (1419.5 to 1421.25).

Market VLTY at the open was above 50, but nearing 50 and may drop below as price starts to settle. If price crosses above 1413.5, ABC Bullish setup will take it to 62-79%. With 2.5 to 4 pts targets and 2.5 pts stop is well within my Trade plan.

So, my entry was set at 1413.5 (above pHi/R1 Cluster). STOP was derived from this logic. Larger ABC stop is at 1409.25, but if price starts to decline below 200-SMA and this trade and ABC may be influenced by negative momentum. So, I placed my stop safely at 1411 (-2.5 pts). Targets are derived with Price confluences of ABC 62%AB at 1416.25 (+2.75) and 79%AB at 1418. (+4.5).

My ABC Bullish Long trade from 9.36am to 10.10am worked out well and I am out of trade at 1418 with 2.75 and .4.5 pts profits. At 10.30am, Price retraced back to 1414 level.

I still think price will reach FZP Target range some time today (1419.5 to 1421.25). But I will wait for another opportuntiy with some positive price-action to
trade.

BarTime Update
December 11, 2012 3:44 PM

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Here is the final update of BarTime.. Here it shows side-ways and risky trading when BarTime > 150 sec while BarTime < 150 sec provides excellent trade opportunities.

BarTime wins again!!
December 11, 2012 2:27 PM

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Around 11.30 am, I started to notice a potential Head and Shoulders pattern formation with a Head (high) of 1434 and Neckline at 1429. Around 1.10 pm, I saw first sign of Volatility Expansion Bar (RED) in the second shoulder signaling potential bearish trend. This itself is NOT enough for me to trade. I need to check the Bartime and VLTY to confirm it is side-ways trend. I need BarTime Averge to below 150 seconds to trade. But I kinda did not notice ignroed BarTime (which was printing over 200 seconds for 1220 Tick bar), and Shorted the low of the VEXP bar at 1430. BarTime continued to tick above 150 seconds and in next 10 minutes it traded above 1431. I realized BarTime is going to drag my trade further and I exited with a loss of 1 point.

Note to myself: Must check BarTime and VLTY on every trade!!

Side-Ways Trend
November 28, 2012 3:37 PM

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Most traders have tough time trading side-ways markets. Many traders may be right on their setups or detecting the trend, but during the choppy side-ways markets they lose more money. In Intraday futures, I use BarTimes to measure the side-ways markets. On ES 1220 Tick Chart, I look for time to complete 1220 ticks. If the average of last 5 bars exceeds 150 seconds, I know markets are slowing and side-ways trading may be in order. I also look at Volatilty (VLTY) on the same chart to measure potential risk zones.

Today after market reversed its 12 point loss, around Noon, I noticed VLTY went above 50, signaling potential risk zone. Also, from 12.30p onwards, the ES 1220 chart showed VLTY > 50 on fiscal cliff news. So, I avoided trading any NEW trades until I see VLTY below 50 and BarTime falls below 150 sec.

Patience has its rewards…
November 26, 2012 3:58 PM

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This morning ES gapped lower 5 points. General wisdom is to trade from SHORT side on big Gap up or big Gap down Days. Todays’ Gap is about 40%ATR of daily range and is not a big gap down day. Hence today it may be choppy day with slight bearish bias. After market open, market drifted lower but showed first sign of reversal from 100% GAP levels. There was a large ABC formation from 11/22 and 11/23 with AB range from 1387 to 1407.

In this ABC, AB leg took 134 bars to complete (Friday’s rally) the AB range (1387 to 1407.5). Around 10am, AB retraced to about 50% range giving first clues of potential continuation of rally from Friday. ES retraced 50% of previous swing in BC Leg (60-70 bars). Comparing to AB Leg (134 bars) it is about 50%. But this itself is not quite enough for it to reverse and start building CD leg. Fib. Ratios between the AB leg showed 61.8% ratio around 4-6 points below the 10am price. I decided to wait for 61.8% so I can get into the trade. About 11.15-11.30am, ES further retraced and hit my 61% range. ABC is also balanced as BC leg took 150 bars to complete this range. This would be a great candidate for ABC if it were to trade above the EL level (1397). I patiently waited for a LONG at 1397. Relatively simple pattern to trade. My risk is 2.5 points (Below C). I placed my targets at 1399, 1402 (38%) to 1407 (62%).

Patience paid off… About 12.22p, my first target 1399 (+2 pts) was triggered. After side-ways and choppy trading, at 2.50pm, my 1402 target was hit giving me +5 points.

Anticiaption of Pattern Targets
November 20, 2012 12:50 PM

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I am a big believer of Confluence Zones. When price levels from multiple trade setups (could be totally different) gives a confluence, this has a bigger meaning for me. I never use price levels to trade. I trade Pattern Setups NOT the price levels. So, this price level confluence I use it for mostly EXITING the trades but not enter the trades. Anticipation is an emotion where we expect a certain event (could be good or bad) to happen. In trading world as part of trading plans, we must expect or anticipate objective ideas of how a trade may result. In other words, we trade a setup or pattern and anticipate it to reach target or hit the stops…

Today I was trading an ABC Bullish pattern in ES 1220 Tick charts. This ABC Pattern does not have 62% retracement but after a C retracement (58%) it started trading above 200-SMA. This itself is a confidence booster. The EL was also trading above MidBand at 1383. I thought it was a good entry at 1383 with a stop loss at 1381. Then came the analysis of my potential targets. From ABC, 62%AB is at 1386.25 and 79% is 1387.5. Now from Fib. Zone Pivots, the first FZP resistance zone is at 1386.5 to 1388. This phenomena occurs pretty regularly. So, I thought I have a great chance of trading ABC for at lease 3 points Profit (to 1386.5) with a STOP at 1381.5.

Trade was entered at 1383 (EL above 200-SMA and Mid Fib. Band). Target: 1386.5. Here is how the trade worked. I exited 3 contracts at 1386.5 (3.5 pts profit) and then I waited for my next target 1387.5. 1387.5 was traded but my next target was never filled. My Trailing Stop Loss was at 1385. So, I exited my second set of Contracts at 1385 (netting 2 pts Profit).

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