Taylor Trading Technique Nov 2007

[waveslider 10]

check out my post on "wolfe" thread to see an interesting pattern..

[RAVIN 10]

Once again thanks for your excellent analysis in terms of "If...Then" Scenario for Wednesday, 7-11, Dogpile. very profitable.

 

After a WRD , once again we could be in for a 80/20 trade (Linda Raschke) ,

20/20 of Arthur Ullirich (Tradetutor).

[Dogpile 10]

Wednesdays trading session was quite clean:

 

after 2 'low to high' days, we traded 'high to low'

 

the market tested up into 1514.25 resistance (previous days highest volume price) for a beautiful morning reversal opportunity to enter for the 'high to low' day.

 

note that the market tested towards the 15-min 20ema FIRST. The market will test this ema on the vast majority of days so if it starts too far away from it, it often will 'correct' towards it at some point. measuring the distance to the 15-min ema is a very nice and simple way to measure 'location'.

 

also, the early afternoon move up towards VWAP never 'accepted' the VWAP price. It tested under it and rejected it. This information is very valuable. Along with -2500 breadth (advances - declines) and 'down volume' that swamped 'up volume', you had nice tape-reading signals to tell you the odds remained on the short-side. these signals were loud and clear that this could truly be a dynamic down day (this kind of day is rare so have to 'go with' it when it does happen).

 

the day was a bit unusual in that it broke lower much earlier than it has done on other strong down days. but, the market clearly alternates in it tendencies. this is why the concepts are really the important thing. focus on the concepts and integrate them with right-brain thinking.

[bh_trade 10]

Dogpile:

 

I have enjoyed reading this thread. You recently pointed out the market's tendency to chop around and build large volume around a particular price before trending away from that area. This concept was something I never paid any attention to but after reading this thread I now notice it on (nearly) a daily basis. Yesterday for example, we built some nice volume in the 1508 area before negative up/dn volume completely took over and the bottom dropped out.

 

BTW, I also enjoyed your prior thread with outlook/chat on the weekly ES action. In a nutshell, thanks for your contributions.

[Dogpile 10]

This concept was something I never paid any attention to but after reading this thread I now notice it on (nearly) a daily basis.

 

of course, the day I posted it was the rare exception to the rule. but this is where 'tape-reading' gets crucial. you can stay out of a lot of trouble if you can develop a sense for action consistent with a trend vs action consistent with range-trading.

 

yesterday was truly rare action. in fact, the highest volume price of the day was only 39,917 contracts (1482.75). This is the lowest daily PVP since I started tracking this a few months ago. This might be a 'tell'.... I do know that tracking this has been very important as extremely high PVP's become very important pivots. what a super-low PVP means? well, I suspect it means that this is VERY strong trending behavior and we could be going much lower. But I am not sure b/c I don't have much history with the super low ones. Perhaps it just is indicator of extreme panic? I don't know but I don't think it is logical to think that few buyers showing up low in the range is a good thing.

 

watching the daily volume distribution build every day certainly has been helpful for me. integrating this with Taylor is even more helpful. Adding in some market profile and some oscillator patterns has been fascinating mix for me.

[Dogpile 10]

review for Thursday:

 

Had Low Violation in morning

Formed range trading around previous days low price (1478.75 area)

Market then tested up towards 15-min 20ema

Then Broke Lower (momentum away from VWAP)

Test up fell short of VWAP

Formed Higher Afternoon Low

Broke Up Through VWAP and rallied hard

Traded 'High To Low'

 

2 high to lows in a row now

 

1478.00 was Peak Volume Price

 

Since 1478.75 was previous day low and now we have a PVP at 1478.00, I think this is becoming an important price pivot. Watch action closely around this level.

 

strange sidenote:

NQ dropped -3.4% today while Russell closed up +0.21%

NQ futures were actually limit down at one point today (-100 pts)

[Dogpile 10]

1478.75 was previous day low and now we have a PVP at 1478.00, I think this is becoming an important price pivot. Watch action closely around this level.

 

this isn't magic, just monitoring the high-volume zones and highs and lows. Todays afternoon high was 1478.50 and then it reversed by -24 pts.

[Dogpile 10]

Review for Friday Nov 9, 2007

 

Today was good example of Taylor concepts defining trading

 

1) we had a very low start due to a large gap down. but given the high close of the previous day, we did not violate the previous day low right away. when starting far below the 15-min 20-ema, the market often trades towards this level FIRST. this is what happened on Friday. (note that the overnight move as measured from the 4pm close into the opening bar low was negative -2.0% --- this is the equivalent of an entire 'trend day' happening in the overnight session. this is a massive gap and given our tendency (per Taylor) to look for 'morning reversals' -- shorting right off the bat was not a high-odds trade. note though that there was no 'low violation' right off the bat.).

 

2) after testing the 15-min 20-ema on an up-move, 'location' has now improved for a short (remember, there had been no 'low violation' so fading the initial move up for a 'morning reversal' is reasonable Taylor type of play. the market did reverse and proceeded down until it made its 'low violation'. note that coming into the day, we already had 2 'high to low' days. at this point, we had a third day. now, you have to think. you have had a very large move down. you have a 'low violation' and it was still 'morning session'. after 2 high to low days and a 'morning low violation' --- the Taylor play is to look for a potential LONG.

 

3) the market went and 'accepted' VWAP, confirming the LONG bias. at this point, the market is either going up or its going to chop sideways. in order to short here, I think you need 'renewed downside momentum' away from VWAP. Thus, the default play here is to be long.

 

4) the market did chop sideways for a while (consistent with my 40k contract-rule) then broke UP until reaching its key resistance near 1478.00-1478.75. This was important pivot for 2 reasons:

a) 1478.75 was Wednesdays low for the day --- and highs and lows are important.

b) it was Thursdays highest volume price --- and the daily PVP's are important. (note that this was a significant 'volume price' as over 60k contracts traded at 1478.00 on Thursday --- program trading algorithms seem to respond to these key daily PVP's quite reliably).

 

5) After testing this key pivot, it drove down hard. Note that the entire move up was on low-volume and actually led by the lagging financial sector. After a LONG move up and a test into key resistance, a short here is a reasonable play for at least a short-term trade. You can see how the 'higher timeframe' is in a downtrend and that this was confirmed by aggressive selling to end the day as 'higher timeframe players' came in and sold.

 

[Dogpile 10]

Review of Monday Nov 12, 2007

 

Had 1 'Low to High' coming into the day = neutral factor

Had 'low violation' in opening few minutes = factor to look long

Price traded 14-15 pts below 15-min 20-EMA = factor to look long

 

Market traded up and through 15-min EMA. Then tested Fridays PVP of 1465.00 = factor to look short. It then flirted around this pivot and eventually got to 1469.25 before making high for day.

 

Have seen this a lot recently where price tests 4-5 pts above/below the key PVP before reversing. Seems to really want to shakeout a lot of traders watching that level before it reverses. Today was no different.

 

the market then chopped around on opposite sides of VWAP (1460.00). I generally look for 40k contracts to trade at a single price before a directional move occurs. This was good today as S&P's didn't move directionally until they printed 40,903 contracts at 1461.00. The market then did a late vertical plunge all the way down to 1439.50, closing far below 'value'. Down volume swamped up volume in the final hour of trading. Somewhat odd action, IMO. Why did the market let longs out during the day only to plunge at the end of the day? Usually, if the market wants to go down, the bias is for the market to go down hard early in the day and force the weak longs out at bad prices. Today, the market let longs out and then tanked at the end. Perhaps this is a sign of a mini-capitulation? The 'profile shape' does not suggest continuation. Note that Market Profile concept is that a close far away from the days 'value' is most often a 'fade' if the profile shape is not 'elongated'.

 

Note that 1438.50 was the lowest price that has traded since the Fed first eased in that surprise 50 basis points on August 17. The futures tested this level after the close. Will 'value' migrate down tomorrow towards/below this level or was today a 'bear trap' whereby price will revert towards the prior days value? We will have to see but 1438.50 is the key pivot to watch for now...

 

[RAVIN 10]

Dogpile,

Correct me if I am wrong

 

Monday was High to Low following from Friday,

Tuesday expected to a buy day "Low to High" , hence Tuesday can be considered as Sell day, and it did turn out to be "High to Low"

 

So a Buy Day followed by a Sell day, so today it should in theory be a Short Sell Day, "High to Low"

[Dogpile 10]

yes,

 

note we started out -20pts vs the 15-min 20-ema so we needed to work-off oversold situation. we also had a 'low violation' early on. this argues for a long trade. after we trade towards the 15-min EMA, location is now set-up for the High first...

 

Note that there is strong support in the 61.00 - 61.50 area so look to exit shorts above that.

[RAVIN 10]

yes,

 

note we started out -20pts vs the 15-min 20-ema so we needed to work-off oversold situation. we also had a 'low violation' early on. this argues for a long trade. after we trade towards the 15-min EMA, location is now set-up for the High first...

 

Note that there is strong support in the 61.00 - 61.50 area so look to exit shorts above that.

 

Thanks again for that insight, greatly appreciated. Beginning to get some sense out of this TT stuff.

We ended up with "High to Low" yesterday, and the momentum was such that it broke through the support zone, hene following the analysis, a buy day can be expected especially with LV on the open, i.e Low to High.

[RAVIN 10]

Dogpile,

Today looks like somewhat similar to last Friday, except that it is a gap up, then the prices test the yesterdays low,, could the rally be sustained so that it would end up as "Low to High" day , remains to be seen,

 

Still that expectation of the test meant that a short after the open was a high probability and also the bounce for quick 10-15min trades.

[Dogpile 10]

after 2 high to lows, a possible taylor buy is a 'higher bottom'

 

there are 2 entries he looked for, the low violation or the 'higher bottom....

 

today looks like higher bottom buy day...

 

expiration friday can be tough though in afternoon

[RAVIN 10]

after 2 high to lows, a possible taylor buy is a 'higher bottom'

 

there are 2 entries he looked for, the low violation or the 'higher bottom....

 

today looks like higher bottom buy day...

 

expiration friday can be tough though in afternoon

 

Friday turned out to be zig zag day (LBR Term) after a wide range on Thursday and also a "Low to High" day , (the second bottom came within a tic though of the prior test). and the previous 1460 support zone turned to resistance.

 

Monday therefore in theory we should see higher prices in which pros. would be selling i.e a Sell Day, and Tuesday therefore a SS day. Hope I am on the right track, we will see how all this pans out.

[Dogpile 10]

S&P's did run nearly +20pts up off the 'higher bottom'... you can see how as soon as it fulfilled the 'low to high' move, it reversed. it was its own little 'intraday high violation' after a +20 pt move up.

 

The day ended up a NR7 (narrowest bar of last 7) and an 'inside day'... A narrow, inside day can be a 1-bar breakout pattern so need to think about Monday being a potentially dynamic day with 'range expansion'. a morning high/low violation is still a 'potential' fade but need to be careful as we could get a strong directional move out of the NR7/ID. Will have to monitor volume/breadth and range expansion off opening price.

 

It looks to me like we have had good buying low in the large trading range and that Fridays afternoon 'higher low' might have been a 'tell'... On the other hand, we are still stuck right in a price zone that has built up a ton of volume now near 1461.00. We have not seen any sustained 'initiative' selling below 1461.00 yet. The Thursday-Friday action does not suggest immediate 'downside continuation' to me... Thursdays down day was on weak volume and Friday made a 'higher low' so maybe next auction is up. We'll see.

[RAVIN 10]

Had a preliminary read of some of the chapter in Taylor's book , especially the one on Pertinent points, am ignoring the chapters 2-4.

You are right Dogpile, the head starts to get dizzy after a while:confused:, have go in the garden to cogitate and assimilate in small doses, however it looks like with some effort and persistance, one can get a handle on it.

 

Overall it is a matter of observing 3-4day swings and making note of their highs and lows and really noting the price action against those for intraday trading , I think the explanations on the central concepts outlined on this thread and the previous one help a great deal in the learning curve.

Keep it up

[RAVIN 10]

Interesting correlation with European Markets:

 

Recently the European markets have been leading the US markets, there was a time when it was the other way around, how long this lasts , who knows. Has also been commented upon by some lady traders like Linda Raschke , Nazila Jafari (Top Dax, S&P, Euro trader and a coach, shame she prefers to coach women primarily:rolleyes:, interviewed in http://www.traders-mag.com, Jan 2005)

 

Linda also in one of her interviews states "The Dax is more indicative of Dowtype stocks, while the EuroStoxx is more indicative of the S&Ps and is actually the more active liquid trading contract by about 3 times", she notes,

"What you'll find is, if you pull up a 15Min Eurostoxx chart and observe a strong uptrend, I could just by the S&P futures right then and have very high odds of a winning trade"

 

Lets see the Monday 19th Nov action via TT:

 

1. Wed 14th Nov ---"High to Low" ----- Sell day ??

2. Thur 15th Nov ---"High to Low" -------SS day

3. Fri 16th Nov ---"Low to High" , close near to open ----Buy day ???

 

4, Monday 19th, "Sell day anticipated --- Low to High"

 

On the dax market gaps down , so as per TT, the shorting opportunity would be after a rally, which occurs in the 1st hour and creates a lower high near the previous days High, ideal place to short, the prices then head south for a drop of over a 100 pts. Hence this would conform to TT and would be a Sell Day,

 

5. This weakness is mirrored right from the open on YM and ES. Now can this be considered not only as a sell day but also one where the Low of the Buy day has been violated, if so what is anticipated for Tuesday,

 

6. Following the ideal sequency of SS day, buy day, sell day, it should be a SS day or because of that violation of low of Buy day, could it be a buy day i.e test of low, or gap up, sell off, formation of higher low????

 

Any comments from TT experts here.

[Dogpile 10]

Review of last few days. There is not necessarily a 'Taylor Play' every day. For example, as noted before, an 'inside day' can set-up a breakout where the H or L violation is a 'go-with' -- not a fade.

 

[monad 10]

Review of last few days. There is not necessarily a 'Taylor Play' every day. For example, as noted before, an 'inside day' can set-up a breakout where the H or L violation is a 'go-with' -- not a fade.

 

 

Have been following your thread with great interest, think your modification on the Taylor method especially using Market Profile etc, appears to be more suited to today's markets.

How do you read this past week's market action in the context of your method.

[Dogpile 10]

I wrote a long and detailed response and then proceeded to erase it by accident. The net of it was that this was a great week to be a Taylor/Market Profile disciple. I have annotated a chart and hopefully it makes some sense as I don't want to write out my entire post again.

 

Maybe someone else can take a crack at a detailed write-up of this week.

 

[elovemer 10]

low put in on wednesday

monday is buy day

 

long on a low made first penetrating the low of wednesday

[elovemer 10]

wed low penetrated during globex sunday

 

low put in on wednesday

monday is buy day

 

long on a low made first penetrating the low of wednesday

[elovemer 10]

below wed low

 

takes faith

[elovemer 10]

if closes near the lows without a bounce, then buy point will be during globex session