pjohnm

Now the upwave from 14:43. Note the contractions in volatility followed by price expanding upwards. 14:59 Price tests R and then gaps to a new high. My reaction to this would be go long or add more to my position. This would at least offer a tight stop. 15:01 As per 14:38, we get a large drop in price, which threatens the DL. We now have a break of the DL, a large drop in price in a short space of time, and buyers have failed to hold above R. Then volatility contracts at 15:04, and at 15:05 we get a lower low (change in dynamic). For me this represents an exit of any long position. Additionally, the red circle represents a short opp in context of what has happened prior, below price following a retracement.

We return to S, which has been tested and held pre mkt, and we get a bounce at 14:43. There should be enough here to prepare the trader to get ready for a long, but given the pace of the preceeding decline, I would not want to enter a long unless the supply line is broken. The next issue is the pace of the break of the SL, which is more than fast enough to catch you by surprise.

The upwave from 14:09 to 14:37 is followed by a deep bounce off R at 14:38. I would find this difficult to enter as a short as this would not represent enough evidence for me that this level was R. 14:38 Note the length of the downbar (far exceeds any upbars on the upwave from 14:09) 14:41 LSL broken Given there is no test of R on a 1 min, I would not have an entry set-up for this action. 1 other point to note. There are no contractions in volatility after the high as we pass through the LSH and LSL, i.e, minimal retracement.

DB remarked in chat that the place to enter had occcurred pre opening. For me, the green circle is a possible entry based on it being above price following retracement on 1 min (and in context of what has happened prior).

This chart shows what I was looking at this morning. There are 4 boxes highlighted which represent areas where there is contraction in price volatility followed by expanson in price movement. You can see that the first 3 boxes that it is the sellers who have command but but after the 4th box, it is the buyers who show strength. There is a lot going on here so it is easier to summarise: Post 14:02 Possible change in dynamic as upwave exceeds the downwave 14:09 DB 14:15 Rise in price following contraction of volatility (change of dymanic to the previous hours action) 14:16 HL created 14:17 Break of supply line, break of LSH Note this is all happening at minor S/R (and 3pts above PDL)

Here's what Im looking at.

Relying on the obvious S/R levels provided limited opportunity to participate in todays action. And the reaction to the pre mkt levels would be difficult to catch on a 1 min chart (certainly with my limited armoury). The takeways for me today are: ensure I know when major news / data is due so not to be caught out by high volatility have no bias apart from when price opens above / below PDH / PDL look for reversal behaviour as price approaches PDH / PDL One other thing, how did I not notice what was developing in RT in the second chart? I believe it is because I have not been paying enough attention to where price opens and using it as my reference.

Oct 3rd Pre Mkt Macro levels of 2780 / 2820 still in play (but note previous day low of 2772). Price has since moved away from the lows of the TR and 2804 & 2796 provide potential S/R for the open. Given the upmove since the close, it should not be a surprise if buying strength continues. Looking for breaks of D/S lines with entries above the LSL/H around these levels, also looking at entering on RET's once a D/S line is established. Long bias unless 2796 breached.

Given that we are at the mid point of the range that has developed since the 27/09, should it be treated as a hinge?

Using the above as a guide, the key points this raises for me when considering how to create my own plan (and then back test) are: What time will I be available for trading? Should the backtest only be at those times? Can the method / process for locating S&R be defined more specifically? Re entries: What is meant by a double top? 2 consecutive 1 minute bar FTB's? Can this be described in more detail? Where is the placement of the stop loss / what is the criteria? To me, a mechanical plan is of greater value as it allows comparison between what you have done in RT, versus the back test. The more that is left open to interpretation, the harder this becomes. I would also want to limit the variables i.e focus on DT's using 1 contract only.

Watching in RT, these points are the areas I would want to short.

Oct 1 Pre Mkt The sell off from the 25/09 has broke the DL from the July rally and subsequent action has shown weakness in the failure to break the 25/09 down rally midpoint at 2820. There is however, a show of support at 2780 so this is our important S/R for today. 2790 and 2812 have also been more minor levels of S/R. (2800 is the MP of this range and in my case, one to avoid). Pre Open - Support has been tested and held at 2780, sailed past 2790 and 2800 and we are now heading towards 2812 / 2820. Gameplan Short at R (2812 / 2820) if double tops and / or a DL has been broken Long at 2790 / 2780, if a double bottom and / or SL has been broken No trades at 2800 Long at 2812 + above a RET to the DL Short at 2790- below a RET to the SL Long at 2820+, above a RET to the DL Short at 2780- below a RET to the SL

28/09 Pre Mkt Failure to break mid point of 21/09 - 26/09 downmove. Overnight supplyline converging on demand line from 26/09 mid session. (At long term S/R of 2800)

Watching the open this morning was interesting because of the number of potential support zones. The pre mkt TR had its base at 2782- and the hinge that developed at the end of the previous day brought attention to 2780, (not forgetting longer term S at 2778). It would appear to me that confirmation of S would be needed in order to take a long i.e, a test. A supply line had also developed pre mkt to guard one against a long. So what happened? We did get a successful test at 2778+ and price was kind enough to create a higher high as well as breaking the supply line before returning to 2778+ and hitting the wall. Contrast this with similar action at the opening on the 26/09 where S had developed at 2782 30 mins after the open. There is a case for taking a long as soon as successful test of S appears, but there are 2 other factors to consider. Has the supply line been broken? (If it exists) And where is price in relation to the previous session? In the case of the 26/09, the supply line had been broken, but price couldn't make a higher high and we were of course below the PDL. As for the 27/09, we had a break of the supply line, followed by a higher high, aswell as higher lows since the PDL was made.

So the long at the hinge / pre mkt support didnt play out (2780.5), nor did the supply line hold, but interday support manifested itself at 2779 after the initial break of the supply line and opening high.

27/09/12 Pre Mkt chart (5 Min)

Here's my take on the NQ 100 on 26/09 having watched the opening 60 mins in real time, S/R levels have already been posted by Gringo so no need to provide a macro chart. Note that the market has suffered large sell off during 25/09 session, opening below PDL suggests continued weakness. Pre Mrkt - Supply line established pre open Opening 20 mins (14:30 – 14:48) Price reverses at the pre mkt supply line (2796), failing to reach the PDL or S/R established at 2800. Steeper supply line drawn (v pre mkt line) as TR midpoint broken, retrcement back to mid point but lower low follows (more weakness) 14:48 – 15:00 Supply line broken as down momentum slows. Note the contraction in volatility, selling pressure has reduced but buyers do not follow through 15:00 – 15:16 Selling momentum continues to decline as price approaches S/R at 2778. Note that price is held at 2782.10 on 3 occasions and that this may actually be more significant than the foresight line drawn at 2778. Lower low follows and creates new supply line, price bounces off S/R at 2778+ and returns to interday S (now R?) at 2782, in conjunction with the supply line. What next? A marked contraction in volitility at 2782 from below. Consider a sell stop below the bar at 15:20. This would seem counter-intuitve given that S/R was drawn at 2778 but the interday action showed 2782 to be important. Given the evident weakness (both pre mkt and after the open) plus the potential for interday S to become R, we have a newly drawn supply line aswell as the contraction in volatility at 15:20 to set a tight sell stop below the bar (with the stop just above the bar). Takeaways - My trading rules need to consider near term trend e.g has the market opened above/below PDH/PDL? Look for interday S/R, do I consider these more important than longer term S/R? (If it stops you trading countertrend, then yes).

Also, contrast with the action on May 4th and 7th, an almost identical scenario. But, we didnt get a bounce above the opening on the 7th, so a buy stop above the high that day would never have got triggered. A purchase near the climax low would have been triggered, and eventually have failed. Would the action from the 7th - 11th have prompted you to get out? If not, then at least you had a tight stop.

No 2 climaxes will look the same, but this certainly contains the conditions I would look for i.e, very high volume and a technical bounce from a low. Also note the close is well above the open. One could use a buy stop above the June 4th close, or wait for a retrace back to the climax low to enter long.

This is a long one but there is a lot to consider (reading from left to right): Aug 4th & 5th Combined volume over the 2 days looks like a potential climax and a technical rally appears on the 5th. An entry could be made if you can get near the climax lows. That opportunity comes on the 8th but the stop loss would be triggered. Aug 9th Another pot'l climax, price closes above the opening following tech rally. Same drill as before. Aug 10th Selling pressure checked and 80 has the look of a support level, maybe this can be viewed as a test of 80. (Price does not give an opportunity to enter near the climax low). Perhaps there is an opportunity to enter long above the highs of the 9th & 10th, given that sellers appear to be unable to take price lower. Aug 12 - 17 The area of interest now is the mid point of the rally from 100 down to 76. The daily price range has narrowed, volume has declined. Demand appears to have run out of legs. Price has spent 4 days at 87.5/88. If you had taken a long, then the demand line will guide you when to get out. Given the action over the 4 trading days, a short could be considered should the demand line be broken, an entry below the low of the 17th. Aug 19th 80 acts as support again. Price bounces off and if one is not in already, then here is a good as place as any to go long. For those who have taken a short at 86, you treat the 17th as a lower high and let the supply line guide you. Likewise those who are long, draw your demand line from the climax low of the 9th. Aug 28 Supply and demand lines converge to form a hinge. Aug 29 And its the shorts who get taken out, if they were using the supply line as a guide. Those who had taken the short at 86 may consider 88 as pot'l R and 88+ as their stop loss level. Aug 30 - Sep 1 3 days of failure to close above 88.5. Note the daily price range has narrowed again. We appear to be in a trading range between 80 and 90. A short could be taken here, or below the low of the 1st. Sep 6th Price bounces off the lows, warning those who are short that previous R might not hold. Demand line in tact. Sep 16th Demand line in tact but no higher high since Sep 1. Note daily price range has narrowed again. Volume has been steadily rising and the buyers are happy to eat away at supply, until now. Volume has now dropped off considerably. Supply has consumed what there was to offer, we are still below R and demand has dropped off. Where do we consider weakness to show? Below the low of the 15th / 16th? Or do we wait for the demand line to be broken. Or do we just automatically short R? Sep 22 All of the above options would have paid off, and those long from S at 80 have had their demand line broken. Note that price has now stopped dead at 80. Given this and that price has fallen on strong volume, long buyers should be wary. Sep 23 Volume over the 2 days has risen above the norm and price still fails to close below 80. An automatic long here would need to be considered as buyers have shown increasing interest (high vol) and protected S. As for stop loss, we need to look at the poke below 80 and the action on Aug 9th. So is the long worth the risk? Sep 26 We now have another poke below 80 and we have to consider that support has been extended to 77.5. So a long above the highs of the 23/26 would leave us some distance from S and our natural stop loss level. Sep 30/31 Price now closes below 80 for first time, and again the next day, but price fails to breach the climax low of Aug 9th and volume is not showing any sign of urgency. So a long here would afford a tight stop. We should also note the supply line from 90. Oct 4th If we hadnt taken the long, we have now broken the supply line and have to be prepared to watch price leave without us. Oct 19th Auto short at 90? Note the daily range hasnt narrowed like previous trips to 90. Oct 20th More warning to the shorts. Price bounces off lows and a demand line is in place from Oct 3rd. Note the angle of ascent as well, buyers are not hanging around this time. (Contrast the buying waves to 90 with the 2 selling waves to sub 77.5) Oct 24th Price finally breaks 90, volume is climactic but closes at the high so it should be viewed as strength, given what has happened since Oct 1. For those looking at a long, note that price has reached the top of the supply / demand channel, and we are approaching S now R at 95 from the Jul trading range. Oct 25th It shouldnt come as a surprise that price bounces off 95 as it looks somewhat overbought. Oct 26th We get a retrace to 90, those looking for a long could do so with a tight stop. Oct month end We have a hinge with pricing closing at dead centre. (Low volume and narrow daily range). A pause before an advance, or preparation for a fall? Nov 1st Shorts look to drive price down and are rejected quickly. Note the demand line is still in tact. Options from here if one is not already in. Buy S at 90 / Sell R at 95 with tight stops. Or look for breakouts of this range. If we are already long, then we have seen no reason to exit.

Ignoring activity prior to what is on the chart: March 5 - 28 Trading range formed with mid point of 106.5. Note the firm rejection of the lows on Mar 15, suggests strong support at 105 (pin bar + climactic volume). Does the action on Mar 26 serve as a warning to those looking for the market to rise? Lack of demand at the high as there is minimal evidence of selling interest (low volume). Mar 28 - 29 Sellers see the lack of buying interest, supply increases and although buyers join in, selling pressure is the dominant force, dropping from the high of the trading range through S to new lows in just 2 days. Since Mar 26 we have had indication of a lack of buying pressure at the previous trading range high and now clear indication of strong selling pressure (large fall in price on strong volume). Does the market continue to fall or do we get a test of S now R from below? Hindsight trading options: Long: Only if evidence of selling climax or break above March trading range Short: A sell stop triggering below 105 with a stop just above 105 (how far above?) Short: Wait for a breach of 105 (S) with a test of S now R from below You could also have bought S and sold R during March Mar 30 - Apr 10 S now R is tested from below. Lower high created followed by lower low. Although an apparent supply channel has formed, the action 2 days prior to the 9th and including that day indicate a lessening selling pressure (falling volume plus failure to make new low). Apr 10 - Apr 24 Supply line breaks, price forms new range which shows majority of trades taking place in high of the range between 101 and 105. Buyers appear to be eating away at supply, volume gradually declines and sellers appear to be done. May 1 -2 S / R at 105 breached from below. Price closes at mid-point of March trading range. I would have a long bias given the action in April and would look for an entry close to 105 with a tight stop. May 3 Decisive rejection of Mar trading range. Supply enters rapidly and buyers are overwhelmed as per Mar 28/29. Long bias gone so look for short. Again options are sell stop below the April low or look for a breach followed by retrace. May 4 Volume looks climactic but price closes near the lows. to May 21 Price never gave sellers a chance for a retrace. Volume gradually declines and a 7 day run of lower highs ends on May 21 May 25 Obvious hinge (narrow price range + v low vol). May 29 An attempt to lift price above the hinge fails miserably. May 30 - Jun 1 Supply increases and selling pressure remains dominant force. Volume again looks climactic but closes near lows. Angle of descent looks like oversold condition. I would need to look at historical charts to determine where the next short op might be.