Dogpile

today, we are in 'breakout mode'. This is actually rare situation where we closed yesterday with LOW 15-min ADX. I think odds today are on a directional move away from the 1507 area. My guess is up towards 25-30 but I will remain flexible and just 'go-with' the momentum. I am not going to fade a move this morning as I see no significant resistance above yesterdays high. If we break lower, I will go with that too but be mindful of action relative to VWAP to signal that the 'tape' is not signalling a big dynamic down day.

let's review today. The market closed high in its range on Friday. But the market gapped down big this morning. Despite the large gap down, we did not have a 'low violation'. The market traded UP off of the opening price and spent a long-time above the opening price. There was a low violation later in the day. This low violation is not a Taylor type of buy because a Tayor 'low violation' should come in the morning. Note that the day was just not THAT bearish relative to opening price and relative to intraday VWAP. The market did end up trading 'low to high' after 2 high to low days. Personally, I made 1 trade today and then couldn't find another good entry. Very tricky 'structure' and I am sure today tore up a lot of traders. Patience and discipline. by the way, this is something I have noticed: the market will spend most days chopping sideways in the middle of the day. my rule of thumb is to NOT expect trending price action until AT LEAST 40,000 contracts have traded at a single price. If less than 40k have traded at a single price -- as they did today before the move back UP into the range --- then don't expect a move to carry. Once 40,000+ contracts have traded at a single price, then that is a signal that a 'trend' could develop. It's like the market MUST chop enough people up each day in the middle of the day before it can really move. If it starts before that, it is likely a fake. Just something I have noticed to watch for.

I am watching VWAP to help read 'the tape'. Reading the tape was a crucial aspect to Taylors trading as he said it over and over again. A few rules of thumb I use to keep you out of trouble: If price is spending even 'some' time above VWAP -- then the day is likely not that bearish. A big correction is probably a buy. I also find it a nice reference level in terms of 'todays vwap' vs 'yesterdays closing vwap'. If todays VWAP is greater than yesterdays closing VWAP value, then a good correction is also a buy. If todays VWAP is less than yesterdays VWAP and price is not strongly rejecting the current day VWAP, then the market is again, likely a buy. These rules of thumb keep you looking long most of the time. The only time to look short then is when price is strongly rejecting VWAP AND vwap is building less than yesterday VWAP. These are those really bearish days to be short. This doesn't mean can't short other select times (for instance I also like shorting a 'high violation' into resistance -- in the morning session (regardless of VWAP).

that is right. however, given the location of the close relative to the intraday low, we seem unlikely to get that 'low violation' as we are actually closer to a 'high violation' than a 'low violation' given the closing price. note we made an afternoon 'higher low' as there appeared to have been a wall of buyers down near 1503.00. when you build up a lot of volume low in the recent range and form a late afternoon 'higher low' --- this generally means the market will attempt to auction up next -- which aligns nicely with the 2 recent 'high to low' days. So we are in the situation of having a bullish bias but we might get a 'high violation' first, which for Taylor is short-term bearish. Thus, what do you do? Plan B would set-up something like this (keep in mind Fridays closing price of 1517.75): 1) You get a high violation above 1520.50 into the mid-1520's, call it 1525. 2) 15-min 20ema closed near 1511 -- thus a big premium to that is short-term bearish as we tend to move back towards this EMA IF we start out really far away from it. 1511 + ~13pts = 1524.00 --- this might be a shortable level. (Note 15-min EMA will be moving up so call it 1524-1526 zone for now) 3) You look at support/resistance: this is not super clear but I do see a lot of past volume occured in the 1530-1532.50 zone. 1525-30 has been very 'noisy' (tricky) as well. So if we trade directly up toward 1525-30 area, I would not want to be long and would consider a short but only for a short-term trade back towards the 15-min 20ema. (note this is just in the morning, as Taylor likes to stress looking for 'morning reversals' on tests of key levels). If trades into 1525+ zone, right away -- then we 'could' have a 'high made first' and make the high for the day there. We also might just need to trade down from there to test lower before going back up for a 'low to high' day. But either way, the location slightly favors shorting there. The better trade would be for it to trade back down towards the '15-min 20ema' and then potentially go long in hopes of a 'low to high' day. This is consistent with 2 high to low days, the Friday buying that occured low in the recent range and buying on a correction would be consistent with buying a 'higher bottom' vs Fridays low --- Taylor talked a lot about buying 'higher bottoms'. Thus my initial gameplan is: Look to be a buyer on Monday as the day looks to have a constructive set-up, but in back of mind, consider a short if the market starts out 'too high' and play for a short-term trade back towards the 15-min ema - then potentially look long. I think this thinking is similar thinking to Taylors core concepts of: 'buying a higher bottom' and/or 'buy day, high made first' After that initial gameplan, its about reading the intraday action.

My version of monitoring Taylor concepts: Week in Review: I have plotted at the bottom what I think is a helpful indicator to help with 'location'. This has to do with 'location'. Thus, I have plotted an indicator that shows where price is starting the day relative to the 15-min 20 period exponential moving average. The market will 'test' this 15-min 20ema almost every day. One idea is to counter-trend trade the morning session (like Taylor did) if the market is starting FAR away from the 15-min 20ema. This cannot be taken in isolation -- it depends on the last few days of action but this is a good additional indicator to think about as you review the action going on, IMO. So here are my concepts to monitor: 1) do you have a high or low 'violation' (violation of previous day high or low)? 2) what has been the recent action (last few days) in terms of trading 'high to low' or 'low to high' (this is the first indicator) 3) is price starting the day FAR away from the 15-min ema? If you have had 1 to 2 'High to Low' days, then a low violation with price starting far away from 15-min EMA, be careful of shorting and consider the long-side.

So today looks big and scary. But actually, we are in 'balance'. This kind of day reminds me of the big down days last August. big down move, sideways chop for a few hours until 40k+ contracts build up at a single price... then trend away in the afternoon from VWAP. note that: Price=VWAP=PVP <--- this signals 'balance. From balance comes a directional move. I am look for a trending move away from 1532.50 of ~10 pts, perhaps more so, break up could lead to 1542.50+ break lower could lead to 1522.50 note we could break one way, do a trap and then rocket the other way. This would be most evident if we make a 'higher low' after breaking lower. a break in one direction should not return to 'accept' the VWAP price -- it should break and trend away so this should be a clue that a trap may have just occured.

This thread is to discuss Swing Trading from a George Taylor perspective.

yesterday really screwed with the concepts. we had a very low close on Tuesday, then a 'high violation' on Wednesday morning which was a 'gap out of entire previous days range'... We had 2 'high to low' days coming into Wednesday. Thus, we had 'conflicted' structure. Thought, we might have been due for a 'low to high' day but we had a morning high violation -- and end of month buying along with up-bias on morning of a FOMC decision. But, we traded into overhead resistance with a high violation right at the open... this sets up a short-trade. We the traded down about -4 pts and you could see by watching action relative to VWAP that we were not going to have a 'dynamic down day'. Thus, we 'crept' up. Then you had the FOMC movement which went and tested previous pivots perfectly. Finally, you had a 'bull trap'/selling tail. The bull trap and downside gap this morning means we are trading -16 pts under yesterdays most popular price. This is not good initial location for a short but is also not yet a 'low violation'. Thus trading down further could set up a long or testing up scould set up a high to low day, IMO.

excellent post waveslider, note that the Taylor technique is basically about fading a move outside the previous days range. Steenbarger (in the link you posted) states that: 85% of days trade outside the previous days range and ~51% of those days CLOSE back inside the range. traders like Linda Rashke advise just looking for price to trade back towards the range and make a few points that way. Steenbarger does not discuss what % of the time the market violates the previous days high or low and then merely trades back into it but it is clearly a very strong tendency.

One other thing: I am marking 1533.50 as a good support zone and 46.00 as a resistance zone. Thus, a short could be a reasonable play and cover somewhere above 1533.50. A long could be a reasonable play and sell somewhere below 46.00. That is my take anyway. Added edit: the target for a Taylor short-term long btw is somewhere around the previous day low... thus, go long somewhere below the low and sell into the test of the low.

Ravin, trust me. just stick with the concepts and don't worry about all the labeling. it looks like we are going to get a 'low violation' this morning -- a violation of previous day low. This factor makes it a potential LONG, regardless of the day. I stress the word 'potential' because a low violation is not enough to actually trade long. You need 'the tape' to confirm it. The market can form a low first or a high first right? The ES futures traded 'high to low' yesterday and are gapping down. George Taylor writes: "[The Book Traders] plays are an even break that he will make a profit, much greater when he wins then the loss when he loses. Any method or system that gives you a 50/50 chance is a pretty good one with all its faults." ("The Taylor Trading Technique" page 11). Thus, the Taylor technique is more about finding good location on trades than it is about actually getting direction right, which even Taylor thought of as 50/50. In general, selling a high violation and going long a low violation is all about getting good location relative to the previous days trading. With this low violation today, location favors a long. That said, you could make an argument that yesterday mornings 'high violation' marked an end to the upswing and we have begun a downswing. A 'high could be made first' today. Thus, it really comes down to your short-term trading ability. You have a bias long this morning because of the low violation (location of long better than location of short) but respect the ability of the market to go down from here 50% of the time, in which case you would want to find a short-trade. Personally, I am looking both long and short today -- but my underlying preference is long, simply because location favors that play over the long-run.

I used to follow software stocks fundamentally in a previous life so I am familiar with all the major software stocks. Also, I get a newsletter which focuses on this type of set-up.

just checked this thread. I posted a video to the site this morning before the market (8:30am EST). its kind of blurry and I kind of rambled but its just for testing it out anyway. the idea was real though as I did go long the idea today (COGN) and holding overnight. here is the link to check out:

review of day: morning violation of previous day high day traded 'high made first' (lowest price of day came AFTER highest price) built higher value lower high and higher low made in afternoon (triangle) VWAP closed 1546.25 1546.50 was most popular price (in terms of volume traded) closing price was 1547.50 closed with 15-min ADX < 15 and market is 'in balance' where VWAP=PVP= Price

<<When the market is coming down hard, you just bid for it>> sounds interesting, can you give an example? you mean you bid for it at some depressed price I assume and offer out for XX cents higher immediately and just play off the bad ETF traders? please tell more as there could be some nice gravy in that trade. I am guessing you mean to just let ES enter major support/resist zone and stick out a bid for an ETF 20 or 25 cents beyond wherever it is and play it back for the spread? I love this idea, which ETF(s)? you mean only in the morning?

meanth the title to be: Random Comment Regarding Volume Distribution on ES (got itchy finger and posted too fast) when you see price building at a single price and suspect the market is balancing.... wait until at LEAST 40,000 contracts trade on ES at a single price before you can expect a potential breakout. this rule of thumb can keep you fading the moves to the std dev bands until 40k+ contracts trade. somewhere north of 40k contracts, it very often takes 43k+ --- you can stop fading and start looking for a breakout. this simple rule of thumb is just something I have noticed after staring at volume distributions for the last 3 months.... I am calling this: 'Dogpiles Random Rule #1' --- should become a mainstream classic. seriously though, just watch and tell me if you agree. I am talking about the ES.D volume distribution --- I use Tradestation. dog

sorry, 1550-1553 was a high-volume resistance zone from Oct 16 - Oct 18... we traded up and got pinned up to 1548 area this morning pre-market open. A push above that level went directly into more resistance in 51-53 zone.

we had 2-period ROC sell set-up coming into the day --- this is from Rashkes 'Street Smarts' book. we traded above Fridays high early in the session --- a high violation. we traded into a 50-53 high-volume resistance zone. no matter if it was sell day, buy day, sell short day --- it was a short.

hi browns, I think we are in a momentum-type of market these days --- can see growth stocks (tech/medical) strongly outperforming value stocks (primarily financials and assorted consumer stocks). Thus, this is good time to focus on IBD type of momo-names. IBD has nice list of ideas. The Saturday edition of IBD prints the IBD 100 and within that they put bold-faced boxes around the names with some kind of base-structure. I have listed those here. I don't like playing base breakouts unless it is accompanied by a momentum push up and a pullback. I think IBD is a useful paper. but I don't even subscribe anymore. I pick it up once in a while during the week and usually get the Saturday edition to check out the IBD 100.

List For Week Beginning Monday Oct 29, 2007 FTK 53.00 RIMM 121.00 NOV 73.35 GRMN 118.75 CMED 46.09 FCX 117.50 LIFC 43.98 GME 58.69 CTRP 53.10 -------------- CTRP looks kind of interesting to me. The rest look dangerous in terms of getting chopped up as they all seem to have had short-term upswings. The upswings may continue but it looks tricky to me to enter after an upswing is already established.

I have inquired on the Tradestation forum about this and they don't have it. They have an analysis study called 'activity bars' but they aren't any good. that is what they reference though when you ask them about it. what I do is screen-capture the daily intraday volume histogram from the 'matrix' window each day. I then put notes on it and save them in a folder for future access. I have actually found this process to be quite insightful. I summarize the daily daily volume distributions by hand into an excel spreadsheet. Doing this process every day really helps me understand 'value' (higher-volume) zones that tend to get re-tested and imprints on your brain important pivots.

yes, the screen lost some clarity in the upload to youtube.. not sure how to correct that. the code on that is very simple. for a 2-minute chart on Tradestation, just use: ---------------- vars: aa(0); if time =1314 then aa=vwap_h; Plot1(aa,"VWAP[1]"); --------------- re. code-sharing, here is my view. I have realized that what I am doing now is always going to be a bit different than what I will be doing in X months. The concepts are the same but set-ups are kind of transitory -- they work for a while, then they don't, then they work again once you figure out a new twist on the same concept. I feel it is best to share your techniques. The more you share, the more depth you will GAIN as others ask questions and point things out you may not have thought of...

hadn't thought of that, good idea. just to keep the ball rolling, I just set up an account on youtube: go here: http://www.youtube.com/my_account YouTube Username: 'PublicIdeas' Password: 'traderslab' (all lower-case) I didn't mean to hijack this thread. Just an example. I encourage others with an idea to just grab bull by horns and run with it. I am all for a Darwinian process here. ---------- Rule could be that eveyones FIRST contribution is public. If you make a contribution, then send the link of the posted video and also request a private password. Send this to: and you will get access to the new site and password, which could serve as an ongoing idea-sharing video site. dog This is just an example of a way to do this. By all means, it could be improved and/or scrapped altoghether. I will just go with the flow on this as this took about 5 mins to set-up so no skin off my back. note: you can get a free download of video-recording software at: http://www.download.com/SnagIt/3000-2192_4-10717260.html save the file as a '.avi' file and upload it to youtube. (I am not the guy for technical issues like this so if someone knows a way to do this where the video is more clear -- please do it --- but keep it simple).

hadn't thought of that, good idea. just to keep the ball rolling, I just set up an account on youtube: go here: http://www.youtube.com/my_account YouTube Username: 'PublicIdeas' Password: 'traderslab' (all lower-case) I didn't mean to hijack this thread. Just an example. I encourage other ideas to grab bull by horns and run with it. ---------- Rule could be that eveyones FIRST contribution is public. If you make a contribution, then send the link of the posted video and also request a private password. Send this to: swing_trader_ideas_public@yahoo.co m and you will get access to the new site and password. dog This is just an example of a way to do this. By all means, it could be improved and/or scrapped altoghether. I will just go with the flow on this as this took about 5 mins to set-up so no skin off my back.

here is an idea: how about creating a 'group account' on youtube.com and we will pass around the initial password. everyone does a video of a few minutes and posts an idea or whatever they would like to discuss. you have an intial grace period. anyone can post a video. whoever has made a contribution with a little effort put in --- gets the new password. if you go more than 2 weeks consistently without a new contribution you lose password rights (obviously some leniency for vacation or other rules.) a related idea would be to have a public youtube site in which you put on a video. you then get invitation to another youtube account if you contribute something with effort to the first one... some hack could always take the password and delete everything. thus, you have to earn the privledge of the second site in order to show you aren't just a hack. just an idea. maybe that can spark another idea. I have an idea to contribute to get started. will work on it later today.