YM, ES and DJIA Analysis

[BlowFish 10]

Another thing to note via VSA...

 

The low volume hammer is a "test" as it ran down but was quickly brought back up towards the highs on low volume showing there was no "professional" activity to follow it through to the downside.

 

That was exactly the bar I was talking about - a long on the close would not be wrong following plain old VSA. (a picture is worth a thousand words guess I should not have been so lazy). I noticed your post with a similar chart on another thread (albeit a far less 'deep' test). I know a couple of VSA vets that give this particular setup as one of there favourites. Its something well worth recognising.

 

Didn't realise it was fed day that might explain the current lethargy on the index futures.

 

Cheers.

[TinGull 10]

Ah yes....Fed week. Woohoo for that. Guess that just means the markets kinda tread water while my s&p spreads decay into my account....awesomeness!

 

But yes, that's a very popular method of entering into the markets...on low volume tests.

[brownsfan019 17]

It's hard for me to take a trade with low volume after a candle pattern... Just seems counterintuitive to me. I would like a strong pattern, at support or resistance with healthy volume. That is a great setup in my book. Now taking a trade after a strong candle pattern has formed only if the volume is weak on a retest just seems that you are late to the party doing this. What if that retest never occurs and you get a large WRB after the candle hammer? Just say oh well?

 

As I've mentioned before, the candles are one of the quickest ways to get into trades. Of course, that will lead to false moves as well. You just have to maximize the gains on the winners.

[TinGull 10]

What if that retest never occurs and you get a large WRB after the candle hammer? Just say oh well?

 

That's the sad but true fact of the confirmation "test"....sometimes it might not happen.

[OAC 10]

Those Who Don't Use Volume Candles Should Give It A Testdrive On October 31 At 2:15pm Est

Zooooooooooooooooooooooooooom !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[brownsfan019 17]

Those Who Don't Use Volume Candles Should Give It A Testdrive On October 31 At 2:15pm Est

Zooooooooooooooooooooooooooom !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

Very true OAC.

 

Check out the volume based candles on Fed day and you will see how these may or may not help you.

[brownsfan019 17]

This long should have been closed out today after seeing an inverted hammer/spinning top type pattern on Monday's close.

 

Not a big trade, but approx:

entry @ 1513.50

exit @ 1540.50 (one tick from the low of the inv hammer)

gross profit of 27 pts = $1350/ct

 

Not bad for about a week of work.

 

New chart:

 

 

The inv hammer was confirmed today with a bearish day. If you want to go short (disregarding Fed on Wed), the short was at 1540.50 (reversal from long position directly into a short position). Current price is approx 1536.25 Tue evening.

 

Again, a pure chartist is short saying that the Fed news is priced in already and gave a nice short opportunity. I personally would be leary of holding a swing trade into a Fed announcement as we know price can spike everywhere. I think to hold this short into the Fed would require a looser stop, which at the minimum would need to be placed above the most recent resistance level.

 

I'm going to go out on a limb and say that I should just follow the chart and leave my wonderful analysis out of the picture. We'll see how it looks tomorrow.

[james_gsx 16]

Brownsfan, did you actually take that trade?

 

 

I was just looking over my charts and basically saw the same thing. I also agree with the fact that the Fed news is priced in and the chart is setup to move with what the Fed says. It's easy to say that in hindsight and find everything to agree with the move.

 

(I'm not sure if I'm setting up the support levels right or not, but you get the idea of the wedge). Theres a wedge on the ES, and since the market has been trading sideways for the last few months I would lean towards a bearish setup. This recent rise has been done on very low volume, compared to downward moves have much stronger volume. The ES is also up against resistance, where we saw the spinning top on Monday followed by the bearish candle.

 

 

 

Same basic chart on the YM. Does anyone see something I don't see?

[brownsfan019 17]

Brownsfan, did you actually take that trade?

 

Unfortunately, no.

 

Due to our discussions here, I am strongly considering doing more swing plays. My main focus for awhile has been the day-to-day trades and out by 4:15pm. While that works, as you know, I think there's more stresses and such involved. For me, the daily just is cleaner and gives plenty of time for analysis. So, it's a good thing we got this forum area going b/c it's re-opened my eyes to a few things.

[brownsfan019 17]

James,

Your charts look good. Just keep in mind with the S/R you are looking for times where price hit the level at least twice and you are really looking at the upper/lower shadows. You want to see where price was rejected a number of times in the same area. It will never be perfect - where price always rejects exactly at the same price, so I refer to them as 'zones' or 'areas'. It's basically a connect the dots if you will.

 

We can start a new thread dedicated to drawing S/R levels based on the candlestick analysis and nothing else. I'm guessing it will just be you and I discussing (maybe Tin will chime in ).

[TinGull 10]

I see exactly what you see and am really looking forward to some sort of downturn in the market as SPX is getting a tad bit close to short strikes on one of my positions and I'd rather not have to adjust. 10 days for the SPX to move 40 points...that's my cushion. Got a 100 point SPX move cushion to the downside so I'm cool there...

[TinGull 10]

We can start a new thread dedicated to drawing S/R levels based on the candlestick analysis and nothing else. I'm guessing it will just be you and I discussing (maybe Tin will chime in ).

 

Maybe?? Of course I will!

[TinGull 10]

And to note...on a MONTHLY chart...of the DIA...

 

 

October is looking like a higher volume spinning top at resistance, huh?

[james_gsx 16]

Good catch on the Monthly Tin.

 

I said in my blog and on here that I was bearish going into today. We did get a bullish engulfing candle, but it ran right into resistance so I am holding my bearish stance until I get confirmation that a long position will hold less risk. That doesn't mean I would go short, it just means I don't like the idea of going long right now.

 

I think the NQ is the best play out of all the indexes. As you can see the NQ clearly broke resistance and with strong volume. Let me know what you guys think.

[Mitch 10]

Hi All,

Just came in on this today; great thread if you dont mind me saying.Has rekindled my interest in candle analysis.

Just thought I,d let you all know.

Keep up the good work.

Cheers

Mitch

[james_gsx 16]

I made a bunch of fake money with my DIA and SPY puts today :beer:

 

YM closed right at support today, not surprising but definitely a bearish candle. There is one thing I wanted to bring up though since I have seen it a few times. Wednesday we got a bullish engulfing pattern but it closed right at resistance, which is why I was bearish going into today. Was that technically the right decision? By that I mean, did I get lucky or is that something I should look at more often. And what is stronger, a bearish candle closing at support or a bullish candle closing at resistance? Or should I just wait for confirmation on both if I want a less risky play? Sorry for the thousand questions :o

 

The NQ continues to be my favorite index, it closed right at support which was prior resistance of it's small trading range. I think if the YM and ES continue to the downside that the NQ will easily follow and break that support level.

[Nick1984 10]

Wednesday we got a bullish engulfing pattern but it closed right at resistance, which is why I was bearish going into today. Was that technically the right decision? By that I mean, did I get lucky or is that something I should look at more often. And what is stronger, a bearish candle closing at support or a bullish candle closing at resistance? Or should I just wait for confirmation on both if I want a less risky play? Sorry for the thousand questions :o

 

 

I might be more conservative but I reckon you'll end up shooting yourself in the foot if you go into a day with a pre-conceived notion of what the market will do. On the NQ daily you posted up the bearish engulfing pattern is at the top of a up trend so it is a very valid signal for a reversal, and it does close at support.

 

However, I would personally still be reluctant to go on into the next day thinking that it must come down more cause the candle says so. A safe play would be to watch the open and then place a limit trade a few ticks below the support level of the uptrend and see if that's taken out.

[james_gsx 16]

Nick that's what I mean by getting a certain signal to go either direction. If I was bullish going into a specific day that wouldn't stop me from making short or long plays on a day-trade basis. I would also look for a candle on say the 15 minute chart that would tell me what direction the market might be heading. For example if I saw a bearish engulfing pattern on the daily, then a strong hammer or other bullish candle on the 15 I obviously wouldn't fight that.

 

You are also right about the NQ, I wouldn't go long on that chart on a swing basis but if I got something to tell me to go long during the day I would and I would possibly hold it for a swing play. I would be more reluctant too though, because like I said the YM and ES don't look strong at all. It would pretty difficult for the YM to fall 150pts, the ES fall 13 pts, and the Nasdaq somehow go up.

[brownsfan019 17]

Hey guys,

What a week, huh?

 

Here's the short we were looking at:

 

 

 

 

We learned two things:

 

1) Holding during the Fed can pay big time or hurt big time.

 

2) Stop placement on this trade was absolutely critical AND you had to take some heat on the trade IF you held through the Fed.

 

 

 

So this short had 3 possibilities as far as I see it:

 

1) Exited at the close on Tue b/c you did not want to hold during the Fed. End result: +4.25 (bought beginning of Tue and sold end of Tue).

 

2) Got stopped on Fed day based on where stop was. End result: -10.75 pts

 

3) Held and kept your short, but now exited based on new buy (more below). End result: +23 pts.

 

So, as you can see, where you place that stop was just critical. In this scenario, as I mentioned in another post, the stop would need to give the trade some room to work due to the Fed announcement coming.

 

--------------------------

 

NEW TRADE SETUP AS OF FRI!

 

 

 

Wow, this is a nice one.

 

Here's what I see:

 

1) Strong support @ a strong psychological number (1500 even).

 

2) Look at the volume on this spinning top at this strong support level.

 

3) We saw a very similar pattern recently that produced a decent profit.

 

 

If we add the 50 and 200 SMA, here's what we now see:

 

 

I'd prefer it to be touching the 200, but close enough.

 

 

Here's a long that has 2 possible entry points:

 

1) Enter @ market Sunday evening to go long.

 

2) Wait until price breaks the high of this spinning top. The high was 1525, so once price breaks this level, go long.

 

There's good and bad of each, which has been discussed here.

 

 

 

One last note - as we saw earlier, stop placement is critical.

 

In our trade here, note that this spinning top's low is not quite the low of the previous hammer:

 

 

 

As we also saw previously, the hammer's body/low can be retested so your stop placement is critical here as well.

 

 

Good Trading and Do Your Own Due Diligence At All Times Before Placing Any Trades!

[james_gsx 16]

I like it brownsfan, if you look at the DIA there is a nice hammer. I know I shouldn't be hunting for hammers, but it is what it is.

 

Thanks for the lengthy input, it helps a lot!

 

[brownsfan019 17]

James,

It's nice when you get some additional confirmations as well. I'd guess some of the other indexes look the same. Doesn't guarantee a good trade, but could help.

[james_gsx 16]

LEH has a hammer too, I know it's not an index but the financial's are the center of attention right now so I think that would have some impact. It's at least worth taking notice.

 

[TinGull 10]

And XLF...the Select Sector Financials spdr is showing a nice hammer with good volume to it. Oughtta be interesting.

 

[TinGull 10]

Just another chart of this long term resistance/support at 31.00

 

[brownsfan019 17]

Well fellas, sure looks like we have some bullish hammers at support levels all over the place... These will either hold and produce some nice profits or fail terribly. That's my guess at least. What I mean is, if the ES gets below 1500 AND closes below 1500, that could spell trouble in terms of any longs working. So the next few days early next week will be important. We'd love to see these hammers provide some immediate profit and not look back. It would be easy if the ES just kept doing a /\/\/\/ shape between our S/R levels. Now that is EASY money. Eventually one of these will fail due to a break, so we will see when that happens. Right now, this support level, esp on the ES looks strong. We'll see how long and how many times this level will hold.