Pre-Market Discussion For June 11, 2007

[Dogpile 10]

Considerations For Monday:

 

The futures closing prices on Friday were all well above their daily POC's. The afternoon trend showed no signs of sellers but note that NYSE volume tailed off during the afternoon push higher.

 

Dogpile Traders Laboratory

 

The high close sets up a potential 'pinball sell' for Monday. This set-up generally looks for a good flush down so long as price doesn't trade to a low first. George Taylors trading 'technique looks for a short-sale using location somewhere at or above Fridays high for a test down below Fridays high. Rashkes book uses a break of the opening 60-min range to trigger a move lower.

 

Buy programs ran on Friday for the first time in 3-4 days as seen in the 'summation ticks' indicator. Buy/Sell trading programs cycle up and down. They are always a wildcard. Fridays move up allowed the summation ticks to correct up off of extremely depressed levels.

 

Thus you have summation ticks cycling up but you also have a strong tendency to go touch Fridays POC. Hence, should the market trade higher early on Monday, could offer a nice asymmetric location for a short, IMO. Should the market advance on very strong volume, strong breadth etc, this needs to be respected as buy programs have potentially begun a good cycle up.

 

Comments appreciated...

[walterw 10]

Dog : now you took your posts to the next level with great visual aid... congratulations , very nice stuff and thanks for sharing...

 

One question: what indicator is behind the pinball formula ? thanks Walter.

[Dogpile 10]

Tradestation code for Pinball:

 

value1 = RSI((C-C[1]), 3);

 

its the 3 period RSI of the 1 period change.... for whatever reason, it tends to capture a day of a reversal or simply a 2-way (a candle with wicks). In either case, there is generally a trade that sets up in direction that the pinball predicts (a flush)....

 

keep it simple, eh?

[ckait 10]

Friday's afternoon rally stopped at the 38% retrace of the weeks down move could see some kind of a bounce from yhat as well.

[notouch 10]

The ES down move stopped at the 38 fib level which suggests last week was just a pullback in a bull market. The daily candlestick was a bullish piercing pattern. Buyers in control.

[TinGull 10]

Just curious...and please don't take this as a personal attack notouch...but isn't a candlestick pattern only a valid one after confirmation? That is what i was taught with candlestick analysis. I might be wrong, so if I am, please correct me.

 

Price stopped dead in its tracks at the 50% retracement of the move down so far. And also, looking at bi-weekly profiles there is a seemingly obvious sentiment change (to me anyways) with the POC heading a touch lower than the last profiles POC, and the value area also falling a bit. I feel its more of a sentiment change rather than a ballistic selloff because of these slighter moves when compared to the late February.

 

If this week again brings in lower value, at that point I'll be more confident in thinking a real change is underway rather than just a smaller "oops".

 

I may be completely wrong, I may be completely right. I've got no clue what it'll actually do, but that's my 2 cents on the subject.

[notouch 10]

Nison doesn't say it's necessary to wait for confirmation. Some traders do but some just wait for the close of the candlestick. It also depends on the strength of the pattern. A morning doji star, for example, is a very strong signal so waiting for confirmation may not be a good idea. A piercing pattern is also a strong signal, especially when it closes near the top of the previous candlestick's body. That doesn't necessarily mean the down move is over but it does point to strength ahead at least for a swing trade.

[Dogpile 10]

"pinball sell" worked nicely... tested up above previous day high on continuation off the strong Friday afternoon profile (trending action). hit responsive sellers during periods A-B and flushed down to 15-min 20-ema.

 

This first move down was potential A leg of a bigger for ABC down that would go test previous day POC... tough to look that far out though at this time...

[Dogpile 10]

drew chart of what I am looking at...

 

NQ+June+11+2007.bmp (image)

 

comments?

[walterw 10]

drew chart of what I am looking at...

 

NQ+June+11+2007.bmp (image)

 

comments?

 

Nice Dog.. in the case a C wave is forming, what would be your exact timing entry ? I saw in another thread you use par/sar for triggers.... thanks Walter.

[Dogpile 10]

I posted a new chart WalterW...

 

Dogpile Traders Laboratory

 

 

you can see from the fiboncacci grid on the chart that NQ rejected the move down -- it MORE than 'retraced' back up. the B wave should not have gone up that far if it were a B-wave retracement. therefore, it made the ABC pattern obsolete. there was potential for a lower high pattern to go with the tendency to touch previous day POC. however, when it broke the short-term parabolics to the upside, the play was then to go long for a play to the upside... at that point, NQ only had a 12-point range on the day vs usual 20-25pts...

 

re entries:

 

for NQ, I like using the 3-4 min parabolics because of the way NQ trades... it tends to really burst and run further than you think. the parabolics by defnition keep you from fading a move too early of what could be a parbolic move up or down. (I generally use the 2-3 min parabolic for my initial stop and put a limit out for 3-6 point profit objective).

 

I put multiple charts using parabolic acceleration factors of .02 and .03 up on my screen... I go with whichever one lines up with what I am thinking about the higher timeframe oscillators/pattern and the location of the trade.

[walterw 10]

Ok, I see... so when an ABC setup fails to continue, if the B pivot gets swinged you will take the next continuation on that direction... ? Had you try this on tick charts ?... thanks Walter.

[Dogpile 10]

I form a thesis for a pattern and then see how it progresses.

 

I will often still take the short side on the parabolic break if no POC touch and no strong trend day indications --- but will do so with smaller size and then reverse long if it makes an attempt down and peters out...

 

NQ swings can be pretty big. you can often read the higher timeframe pattern wrong and still make a few points just on a volatile price swing off the parabolics. other times the parabolics will trigger at the extreme of the swing and you lose a couple of points with just a couple of minutes of exposure.

 

today we had a reversal during 10:30am - 11:00am timeframe (period C -- 3rd 30-minute bar)... this B-C period is very common reversal period for NQ so you have to now think that the day may have made a significant swing low if you see a real nice push up off a c-period low.... then you can be ready to try a long off a mini bull-flag and play for a swing up.

[notouch 10]

Nison doesn't say it's necessary to wait for confirmation. Some traders do but some just wait for the close of the candlestick. It also depends on the strength of the pattern. A morning doji star, for example, is a very strong signal so waiting for confirmation may not be a good idea. A piercing pattern is also a strong signal, especially when it closes near the top of the previous candlestick's body. That doesn't necessarily mean the down move is over but it does point to strength ahead at least for a swing trade.

 

We now have a harami cross pattern on the daily YM charts which Nison calls "a powerful reversal pattern" i.e. bad news for longs. Looks like typical summer volatility.