YM, ES and DJIA Analysis

[james_gsx 16]

I wish we could get this thread going again, it helped me out a lot. But anyways, I am going to post some charts from today and if anyone wants to add anything go ahead

 

On the YM I see a possible hanging man right at the 100SMA - which would be bearish. I wouldn't want to go short though until we had confirmation due to the choppiness of the market.

 

On the ES I see a dragonfly doji at the 100SMA which is again bearish. Just like the YM, I would want some sort of intra-day confirmation tomorrow before I went short.

[james_gsx 16]

Looking at this again, the long shadows the past few days could be telling us buyers are accumulating at the lower prices - which would be bullish. I guess the best thing to do is get a good close above the 100SMA or a decline with a long body?

[TinGull 10]

I wouldn't consider those "hanging men" since they are happening at the bottom of a trend. That's when they'd be hammers. At the current time it does look a tad bullish in the very short term...

 

[james_gsx 16]

Thanks Tin, I was saying hanging man because of the rally the last 2 days. A dragonfly doji is also bullish, so today would be a bullish signal more than a bearish?

[TinGull 10]

I see what you mean. On a daily chart I tend to look backwards a bit more than just a couple days. But yea, I'd say in the VERY short term it does seem a bit bullish...but I would be more apt to hold on for a sell signal. While there is some volume coming in on the down days, it's in no way climactic telling us that demand could be outpacing the supply in the heavy volume bars. These bars have just enough volume to make ya think it's not a good situation.

[brownsfan019 17]

James,

Sorry I haven't chimed in, just real busy lately.

 

Here's my take on the ES:

 

At least 3 nice hammers near the 50 and 200 SMA. There's nothing bearish about this price action at all.

 

 

 

Now, there's a few ways to interrupt the current chart...

 

1) The multiple hammers suggest that the bears are trying but the bulls are defending this area well. Could result in a break to the upside.

 

2) There's so much fighting taking place here that one side is going to roll over sooner or later and give up. Either the bears are going to say enough is enough and stop fighting or the bulls will simply run out of steam to keep pushing the bears back. Could result in a break to the downside.

 

What I am trying to say is that I normally would feel great about 3 hammers but watching these charts intraday as I do, I'm not totally feeling the bullish love here. I would normally like to see a hammer and then a push up. Not a whole bunch of fighting back and forth. This price action would also indicate that there are probably some large long and short positions being built up here as well. Sooner or later one will win and when that happens, the amount of stops that could be taken out could be large.

 

Looking just at the daily, I would remain long and be cautious around 1550 or so. There's no reason to exit a short currently if just using the daily as your guide.

[brownsfan019 17]

And not surprising, the YM looks very similar:

 

[brownsfan019 17]

James,

I took a look at the blog and wanted to provide some feedback here, so we can discuss it if you would like.

 

First, awesome job! I like the layout and everything. I don't care for blogs where the writing is squished between a left and right border, so I like your layout. Not sure if it's perfect blogging technique, but who cares!

 

Second, it looks like candles are making an impact on your trading and that's awesome (in my opinion)! With that being said, I think you need to really study them if you want to learn them better. Here are my suggestions for candlestick study (and the order in which I do them):

 

1) Steve's Free Newsletter

 

2) The Candlestick Course

 

3) Japanese Candlestick Charting Techniques, Second Edition (Hardcover)

 

4) Nison DVD workshops

 

5) A Live Seminar. Make sure it's a seminar where he is the ONLY one teaching. You do NOT want a seminar that is partnered up with Calhoun, Headley or any of the other marketing whores Steve is now aligned with.

 

A few notes about my suggestions here:

1) The cost goes up incrementally, so keep that in mind.

2) I've actually fallen out with Steve, so as much I don't want to suggest you purchase his materials, they are the best out there. My beef with Steve, in case anyone is reading this wondering, is that he's recently partnered up with some other trading 'gurus' that I don't think very highly of. So while I think Steve is basically a marketing whore, the materials listed above are very good.

 

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

 

With that being said James, I think the main focus of your attention right now is how you are defining your support and resistance zones. Right now, it appears some moving average combo is doing this for you. My suggestion is to take a harder look at PAST candles to help you here. See some of my posts all over the board where I've outlines S/R zones and there's ZERO moving averages on them. Now, when the moving averages line up with your S/R zones, even better. For example, our ES example here this week was just that - a hammer at/near two standard SMA's (50 and 200), along with some candlestick support. Nice confluence there.

 

I think your journey into the candles is going well, but I think how you define your S/R is absolutely critical and just using moving averages could provide some false signals.

[Nick1984 10]

I've noticed that you guys in your swing analysis are using SMA"s pretty exclusively and that the S/R's seem to be mainy visualally generated? Do you use the daily/weekly/monthly pivots as well? I've usually found that when I was swing trading stocks, price didn't really respect the SMA's anywhere near as much as the EMA's. I guess that is based on how the lines are calculated, the SMA will have a lot more 'noise' than an EMA. Each to their own I guess though hehe.

 

The candlestick analysis has been fantastic though, and all this discussion sparked my interest in candles much more to the point where I've been analysing them a lot recently and I must say I actually find them very comfortable. I actually ordered Japanese Candlestick Charting Techniques from Amazon about a week ago so hopeflly it will come soon!

[brownsfan019 17]

I've noticed that you guys in your swing analysis are using SMA"s pretty exclusively and that the S/R's seem to be mainy visualally generated? Do you use the daily/weekly/monthly pivots as well? I've usually found that when I was swing trading stocks, price didn't really respect the SMA's anywhere near as much as the EMA's. I guess that is based on how the lines are calculated, the SMA will have a lot more 'noise' than an EMA. Each to their own I guess though hehe.

 

The candlestick analysis has been fantastic though, and all this discussion sparked my interest in candles much more to the point where I've been analysing them a lot recently and I must say I actually find them very comfortable. I actually ordered Japanese Candlestick Charting Techniques from Amazon about a week ago so hopeflly it will come soon!

 

Nick,

I do not use pivots - intraday or swing. If you find that these levels are respected or provide some confluence, please share here as we are always looking for stronger S/R levels.

 

As for SMA vs EMA, I mainly look at the 50 and 200 SMA on dailys mainly for some confluence with my S/R candle zones. In other words, I would prefer to have both of these line up together. And the reason for the 50 and 200 SMA is b/c those are common settings and ones that many traders look at.

[james_gsx 16]

I like to use the 8 and 21 EMA when they come across as being useful. Sometimes that's simply not the case and they just seem to be "noise" in which case I follow S/R and the 50 and 200.

 

Brownsfan, thanks for the advice. I am studying Steve Nisons Candlestick Course now and it's definitely helping me out. I will read it more than once though, so I can have a full understanding of all the ideas taught in the book.

 

Are there any other candle "gurus" that you like?

[brownsfan019 17]

Are there any other candle "gurus" that you like?

 

Honestly, it's all the same stuff just with a different spin. Different names or formations, but the same stuff. I like Nison's materials b/c they are the best in my opinion.

 

The only other candle guy I used to frequent was http://www.candlestickforum.com The forum is not that active though and like I said, same stuff just different names.

[OAC 10]

I like to use the 8 and 21 EMA when they come across as being useful. Sometimes that's simply not the case and they just seem to be "noise" in which case I follow S/R and the 50 and 200.

 

Brownsfan, thanks for the advice. I am studying Steve Nisons Candlestick Course now and it's definitely helping me out. I will read it more than once though, so I can have a full understanding of all the ideas taught in the book.

 

Are there any other candle "gurus" that you like?

 

How about who I like ? Stephen Bigalow would be another one.

[BlowFish 10]

Interesting charts brown I'd quite like to see volume too (too lazy to fire up charts on my other laptop and havent really watched the markets the last month). I suspect it (volume) is low and possibly declining if so I'd risk a short from a trend line drawn through the high of the last 4 or 5 days. Of course it could go either way but I'd certainly be a bit wary of the long side. Guess I need to try and get up to speed quick on Monday, after 5 days that look lethargic good chance of a decent move one way or the other before too long. Having said that there is a case for support at 1500 (previous resistance). Guess that is looks key (and indeed so far that price has been rejected).

 

Anyway all ways refreshing to see current thinking rather than historic analysis. I'm looking forward to jumping in next week.

 

Cheers.

[OAC 10]

 

The only other candle guy I used to frequent was http://www.candlestickforum.com The forum is not that active though and like I said, same stuff just different names.

 

Brownsfan, sorry I did'nt see this. candlestickforum.com is Stephen Bigalow's site. I had Steve Nison's first book shortly after it came out I guess around 1992.

Is it that there is nothing else new under then sun ? Or there is some new tricks you can teach us ?

[brownsfan019 17]

Interesting charts brown I'd quite like to see volume too (too lazy to fire up charts on my other laptop and havent really watched the markets the last month). I suspect it (volume) is low and possibly declining if so I'd risk a short from a trend line drawn through the high of the last 4 or 5 days.

 

Here it is with volume BF:

 

 

 

So, I see 2 hammers @ support with high volume. I don't know how you might quantify high volume, but for me, that's plenty.

 

Currently a risk-free trade by just slightly moving stop from initial entry.

 

 

Entry based on first hammer is approx 1513.50.

Current price is approx 1546.50.

 

Current gain is 33 ES pts = 33 x $50 = $1650/contract.

 

Trade was initiated Tue (10/23) at the open.

[brownsfan019 17]

Is it that there is nothing else new under then sun ? Or there is some new tricks you can teach us ?

 

Here's the ultra super, uber secret...

 

 

 

 

 

 

 

 

Are YOU ready for it?

 

 

 

 

 

 

 

 

:helloooo:

 

 

 

 

 

 

 

Pay attention b/c here it comes....

 

 

 

 

 

 

 

:shocked:

 

 

 

 

 

 

The secret to great candle trading is ....screen time.

 

Just reading a book is not enough. Just watching a DVD is not enough. As with any good trading plan, practicing this in real-time with real analysis cannot be substituted with anything. There is no 'trick' in trading. Candlestick analysis may seem easy at first glance, but it does require work in front of charts.

 

That's it.

 

That's my trick!

[OAC 10]

That was super, Brown.

Since I picked up the Nison's original book, what stuck in my mind was the mid-point of the candle body and I have been looking at it ever since. It seems to be a balance point or pivot point of some kind. I just wonder if anybody did any kind of research on it ?

[brownsfan019 17]

That was super, Brown.

Since I picked up the Nison's original book, what stuck in my mind was the mid-point of the candle body and I have been looking at it ever since. It seems to be a balance point or pivot point of some kind. I just wonder if anybody did any kind of research on it ?

 

I recall that as well, esp on the larger body candles. Not sure how strong or not it is as I really don't use it but maybe someone else can chime in.

[james_gsx 16]

I know I've said this before, but I kind of view trading like a professional sport. You can always be good compared to the average joe, but the only thing that can get you to the pros is PRACTICE aka screen time.

 

When I played soccer back in the day I was invited to play a tournament in Sweden. I had never met any of my team members before, I met them as they arrived at the hotel in Iceland. We had one week to bond then the tournament - we skipped basically every social gathering put together just to practice. Since the sun never really went down over there we practiced all night and honestly, that was the only reason why we were able to compete against the European teams who had played together their entire lives.

 

Sorry that was a bit OT, but I had to put in the story to get my point across that I agree with Brownsfan

[BlowFish 10]

Thanks for the repost Brown. I used to think it a bit of a cop out when market commentators said things like "I would be short if we break 1500". I'd think well of course you would as the market would be clearly going down! As a trader it is not necessary to predict the market if we react appropriately to what it is actually doing.

 

I have to say the volume is not at all what I guessed it would be - if the volume was high on the red WRB and then eased off on the last few bars it would have been quite a different picture (to me). As it is that first hammer clearly shows buyers stepping in to support that 1500 level. The red hammer a couple of bars later is telling too (its almost a doji/long legged doji). It tests the area again but on reduced volume.

 

Guess we'll see shortly

[brownsfan019 17]

One piece of advice for anyone trading this or tracking - Wed is Fed Day and this one could be interesting. Point is that holding a long with a snug stop is a risky play. It could be prudent to simply exit by the close of business Tuesday or early Wed.

 

Just a heads up.

 

Now, a pure chartist will simply just do what the chart says to do.

[TinGull 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.

[brownsfan019 17]

Good observation Tin. I am not a VSA trader, but we both see the same thing - a test of the hammer that was defended by the bulls. Either way, the result is the same - confirmation of the previous hammer and/or a reason to initiate a position.

[TinGull 10]

absolutely!