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发表于 2009-3-22 19:01
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Yet Another Trend Day in the Market - Trading Tactics
July 29th, 2008 by Corey Rosenbloom
Surprisingly (at least to me), the market gave us yet another trend day, though - again - it was not your classic trend day. Let’s continue to study each trend day occurrence for clues about how to trade them for maximum profit.
DIA 5-minute chart:
Typically, trend days follow range-bound, consolidation days - this was not the case. Typically, trend days begin with a large volatility gap - this also was not the case.
Price did begin the day rather standardly before launching into a momentum move up, making new momentum highs and creating a bullish cross in the 20 and 50 period moving averages. Still, while odds increased for a trend day, one still could not classify the structure as such at this point.
With a new price and momentum high, one should be looking to buy the first retracement to the key 20 period EMA, which occurred just before noon. Price almost immediately satisfied those ‘retracement’ trades but then paused, creating yet another pullback to the key moving average, and setting up a potential new entry.
Here’s where things got sticky for the day.
I always advocate - with my students and in my personal trading - that once you suspect a trend day is unfolding, place a core trade immediately and place your stop beneath the 50 period EMA. Also, any ’scalp’ or swing trades should often place a stop beneath this key average as well (such as the impulse buy trade mentioned earlier).
What happened? A classic “Rinse and Run” or - as I affectionately call them - “F-You” trades (which stands of course for “Fade You” or “Flush You [out]” - or just “Rinse”) occurred, snatching away your long position, taking your well-placed stop-loss with you. That’s ok - you need to trade with stops. The hard part about these occurrences is realizing that you made the right move - it’s not necessarily about making the most money or not getting stopped out - it’s about applying consistent metrics and techniques with edge as you understand it, and letting the edge (strategy) play out over dozens and hundreds of trades.
This time, a well-placed trade and well-placed stop was hit… and price skyrocketed higher without you on board. I try to make it a practice to re-enter following these patterns, because many traders are upset and will likely begin chasing the market higher. Also, many large volatility moves are preceded by those unpredictable, nasty “Rinse” situations.
Enough about that - price did launch higher, and at this time you should have all the confidence you need to believe the rest of the day should unfold as a trend day. Lo and behold, the price - after the momentum move - formed a downdraft against you, even forming a mini-bear flag (if you were quick enough to play it - I was not) and found support at the 200 period SMA.
The final move was a strong, uninterrupted push (swing) into the close, which completed the ‘trend day’ structure. Remember, if it truly will be a trend day, price will open at or near the lows and then close at or near the highs - thus any trade entered in the direction of the trend will be profitable into the close regardless of initial location (provided you don’t try to enter at the end of the day).
Oh, one final note - during trend days, it’s best to focus on moving average for support and resistance, and not be concerned with oscillators such as the RSI, stochastics, or even standard/modified MACD indicators.
Study each trend day and annotate it such that you understand it (utilizing the TICK, TRIN, Breadth, etc) so you can be more profitable when the next opportunity arises.
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Current Dow Overview
July 29th, 2008 by Corey Rosenbloom
Let’s take a quick moment as we begin this Tuesday to view the Daily Structure of the Dow Jones Industrial Average for possible clues of the action ahead.
Dow Jones Daily:
Looking backwards first, we note the pronounced, multi-swing negative momentum divergence - as well as price testing resistance via the 200 day SMA - preceded the recent downward plunge in the market. Given that the broader trend is down, this should not have come as a surprise. What was surprising - to me at least - was just how overextended price became, and how it seemed a ‘bounce’ was forming earlier.
The bounce finally came, which is again classified as a “Bear Market Rally” or counter-trend retracement, and as such, prices often move violently against the trend (typically as shorts cover and bottom-fishers and long-term value players emerge). Risk was still high to the downside via the overall structure, and price could reverse at any point, which it did, and gave us two trend days down in the last three trading sessions.
A positive momentum divergence, as well as a large volume ’surge’ preceded the recent sharp rally, which - as of this morning - has only retraced the key Fibonacci 38.2% retracement and found resistance via the Bollinger Band, just shy of the clearly falling 50 day EMA.
The trend is still down and we are still experiencing a dominant (current) swing in the direction of the trend. Should price indeed form a higher swing low at this point, we would have additional confidence that a trend reversal could be in the works (a trend reversal is a three-step process), but until that happens, we will have to assume that the pathway of least resistance, and greater probabilities, is down, perhaps again testing the Dow 11,000 or lower.
All bets are off to the long-side should price make a new low for the year. It’s probably best to cease trying to call a bottom in this type of market anyway.
Consider joining the Market Club for daily analysis, videos, scans, commentary, and signals if you have not done so already.
Remain on guard both long and short.
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Yet Another Trend Day Down
July 28th, 2008 by Corey Rosenbloom
The market gave us yet another trend-style day down today, washing away most if not all bullish hopes for an extended counter-rally recovery. Let’s view the intraday charts to see what opportunities were in store for nimble and aware traders, who were able to take advantage of the trend structure today.
DIA 5-minute chart:
Most trend days begin with two common characteristics:
A low-range day prior (usually a NR7 or a doji pattern)
A (relatively) large opening gap
The last two trend days (the last was the previous Thursday) had slight but not ultra-range contraction, but neither began with a large opening gap. In fact, both were ‘creeping’ trends, which tend to be the most insidious, hidden style of trend days. Lack of an opening gap can lull us into complacency as we fail to recognize the potential for the trend day to unfold. It’s far easier to anticipate a large intrday trend day move if the initial gap occurs (and especially if there’s some sort of major news announcement).
Barring that, we tend to be in ‘countertrend’ or ‘fade’ moves, and deploying such tactics on trend days can be devastating to an account, especially if done in the futures market or on leverage.
Nevertheless, let’s look at today’s structure for trade opportunities and clues.
The day started relatively ‘normal’ and then price broke beneath Friday’s close not necessarily with fanfare or high volume. Price even was mysterious enough to provide dojis and hammers that lured some of us in to ‘buy long’ anticipating a counter-swing, which led to stop-losses (which likely led to further selling as the ‘bears’ dominated the session almost from open to close).
The only true ‘counter-trend’ move, or retracement, came at noon, and it was a flat-line (correction by time) swing, which precluded further selling pressure ahead. Sure enough, when price ‘retraced’ back to its 20 period EMA and formed three tight-range doji candles, that was your clearest entry signal for a range expansion move and the position I deem the “highest probability” short of the day.
Price expanded out of this consolidation on to new lows for the day. If you missed this quick expansion, there wasn’t much left to obtain, as price once again consolidated, formed a positive momentum divergence… and then plunged lower into the close, invalidating the divergence signal.
Nevertheless, once you recognize that a trend day is forming (or has higher odds of developing than not), you need to enter (in this case short) at that moment and not try to ‘play cute’ with entries. If it indeed IS a true trend day, price will close on or at the lows, so any initial trade location will (likely) be profitable. You should place your stop above the 50 period EMA and trail down to the close - exit at the close.
The SPY (S&P 500) looked similar, although price did form deeper and more stable ’swings’ that allowed for more profit.
SPY 5-minute chart:
Notice the bear flag into the close. Once the trend day was established, price never threatened the 50 period EMA. The ‘flag’ part of the bear flag here was another high probability entry. Also, don’t be fooled psychologically by thinking “price can’t go any lower so I really shouldn’t enter short here” because many times price that gets extended - especially into the close - will continue to get over-extended, robbing profits from those who attempted to stand in its way.
Mark today’s action up as a “trend day” and download your charts and annotate them to learn lessons when the next potential trend day is upon us.
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BUD Stairsteps to Profit - Random Walk?
July 28th, 2008 by Corey Rosenbloom
Anheuser Busch (BUD) has been in the news prominently as the takeover candidate of ImBev (buy-out), and the stock has responded positively in a unique ’stair-step’ pattern which is worth examination. Let’s see what we mean.
BUD Daily Chart:
After rumors were announced earlier this year, the stock began to respond positively to the potential of being a take-over candidate - now with the news well-confirmed, BUD has reached record levels prior to the deal being complete.
What’s interesting is the relatively rhythmic, stable price ‘jumps’ from one level to the next. This stock would be what I, personally, would expect if the “Random Walk” Hypothesis was 100% correct - that stock prices are random and news is filtered into the price immediately as it is released, giving investors nothing more than a random chance for profits.
Of course, we as traders seek profit through disproving this hypothesis, or squeaking through its holes, particularly through emotional price overreactions and situations (trade set-ups) with ‘edge’ but nevertheless, I thought it was interesting to see this pattern and wanted to highlight its occurrence. We would expect to see far more situations like this (gaps and pauses/flat prices) were the theory 100% correct.
Moving on from the brief Random Walk thoughts, let’s look at the Weekly chart of BUD, which shows just how far this stock has risen in 2008:
BUD Weekly Chart:
A slight positive momentum divergence, as well as support coming in from the 200 week moving average preceded this rampant run-up, but it was not the technicals (price chart) at all that did the run-up - it was rumors, speculation, then confirmation which did so, as is the case many times with takeover candidates.
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