Trading The Wyckoff Way

[wjrusnak 10]

Today buyers pushed through R, but found selling pressure at 1700. The only level that found some sort of reaction and that I didn't have labeled was 1682. Buyers got a little excited before price got to 1678-1680 and the line of S seemed to move up a bit on one of the FOMC movements. 1682 also provided R in the pre-market hours and on 11/2. For this reason I'll give it a small red line on my chart.

 

Not sure how anyone else did on FOMC day, but I got a lot of break-even trades. Basically ended the day down -1.25 (including commission). Not a bad losing day at all. Better luck tomorrow.

 

 

Anyway, I still consider 1675-1677 to be an important level of S, since it seems to be protecting us from the lower range. Sneaking in between that level and 1682 is 1680. Could end up being a messy area. Above that, its easy to see 1690 and 1700. If we do decide to enter the lower range, look to find S around 1660 or 1650. Who knows... the midpoint (our friend 1666) could even see some action. Be ready for anything.

 

 

As far as trends go, we seem to have taken a break on the down move to 1650. Buyers held, but they are having trouble getting a serious run back to the highs. Already the up move has lost some momentum as sellers unloaded supply at 1700. Speaking from a price action point of view, buyers can feel good about the double bottom, but a higher high is needed above 1710 to feel secure about making another attempt at 1780.

[firewalker 10]

If you can't see why it's important after reviewing your own chart or my chart above, you might need to review S/R concepts.

 

I think that's a bit harsh towards NAVEEVIa. I didn't trade yesterday but after reviewing the day, I don't see 1680-1682 as thàt important like you & dbphoenix do. Some S/R levels last longer than others, some or more relevant than others, but it's not because somebody doesn't see it that cleary, whole their fundamental ideas about S/R are wrong. Otherwise I should join NAVEEVIa and go back to S/R 101

 

With regards to yesterday, for me 1700 was the midpoint of the range 1688-1690 and 1707-1710. So that part makes sense, since it was all a continuation of what I said on Tuesday. The FOMC whippy action doesn't make it any easier, but I'm looking rougly at 1650 as major S, a range of 1660 to 1685 with 1672 midpoint...

[NAVEEVIa 10]

Please address me a Naveen thats my name.

 

Well i did see those flips of S/R on the chart i posted but did not deem them as important. Why i asked this question was price did find S there & then a buying wave started.

 

Here is my understanding of S/R as DB teaches.

1. Price areas where lots of trades have taken place , so the congestion boxes we draw , the midpoint will represent lot of activity & lot of traders will go green/red in their positions.

2. Areas where traders are unable to find trades which will be swing highs/lows.

 

I would not put 1680 in 2nd category, since price went thru that level first down & then up, contrast this with 1730 which clear must be low volume area.

Please correct me if this is wrong

Edited November 5, 2009 by NAVEEVIa
added more observation

[NAVEEVIa 10]

Heres the chart.

Once these levels are there i would pay more attention to boxes & swings high/lows for the day & how market reacts there.

[DbPhoenix 42]

Please address me a Naveen thats my name.

 

Well i did see those flips of S/R on the chart i posted but did not deem them as important. Why i asked this question was price did find S there & then a buying wave started.

 

Here is my understanding of S/R as DB teaches.

1. Price areas where lots of trades have taken place , so the congestion boxes we draw , the midpoint will represent lot of activity & lot of traders will go green/red in their positions.

2. Areas where traders are unable to find trades which will be swing highs/lows.

 

I would not put 1680 in 2nd category, since price went thru that level first down & then up, contrast this with 1730 which clear must be low volume area.

Please correct me if this is wrong

 

This isn't the easiest time to be learning this, much less applying it. For the last two months we have essentially been in a range from 1650 to 1750. Whether coincidentally or consequently, the volume is fairly evenly dispersed, particularly between 1660 and 1715. This is one reason why the most successful trades this week have been off 50 and 60. Anything inbetween has been characterized by hesitation, backing and filling, congestion. And above 1715, there's really nothing of interest until 1740. One can, of course, plot the microvolume patterns over much smaller timeframes, but the smaller they are, the more easily they are penetrated. Therefore, one has to look at swing points for clues as to where traders are finding support and resistance, or are at least finding interesting trading points. And that's where we are now. Or at least where I am.

 

All of which is why, as usual, the best trades have been at the extremes. However, if one is trading intraday and he's dealing with a very wide range, is he to sit and wait until the opposite side of the range is reached so that he can enter a short? That could take days. What is he to do in the meantime? Sit? Granted that may be the best course, but a suggestion that will most likely fall on deaf ears. A perhaps more attractive option is to go ahead and look for what opportunities present themselves and practice a little discipline in trade management so that whatever damage there may be is minimized. This is also a good time to practice scalping, if one has been looking for such an opportunity. Better yet is to use this as an opportunity to study and observe and avoid allowing whatever bad habits one has to become even more entrenched.

 

It is important not to take one's eye off the macro. The range from 1650 to 1750 has been a subject for some time now, with a midpoint of 1700. That midpoint was a turning point yesterday, within a tick. However, since we've spent so much time between 1710 and 1660, there's no easily definable "extreme" in terms of volume or swing points. And that makes for a "challenging" trading environment. Quite often one can get clues as to what will be the important S/R levels for the day from the premkt activity, particularly the last hour. But not always (as with yesterday at 84, which looked to be setting itself up as significant but which wound up being only the midpoint between the opening range from 87 to 81, and 80, as I suggested before the open, became the long trade).

 

Perhaps MP software might provide better clues regarding these very short timeframes. Unfortunately, the MP Forum is one of the least busy, even though it has the most potential to be helpful with regard to these issues.

[wjrusnak 10]

I think that's a bit harsh towards NAVEEVIa. I didn't trade yesterday but after reviewing the day, I don't see 1680-1682 as thàt important like you & dbphoenix do.

 

I did not mean for the statement to be harsh. I just thought that after he posted the chart with the line drawn through 1680 and could clearly see that price frequently reacted to it, he would be able to see exactly why we saw it as a level.

 

Naveen, I hope you did not take offense to the statement. If you did... I'm sorry. Keep posting and don't worry if we differ in levels, as firewalker never agrees with my levels either.

[wjrusnak 10]

Done by 10:00 am today, but had I another contract, I'd still be in as we speak, since price has not really broken a significant swing point. Took what I could though and that made up for my full stop at the open. 1700 was my important level for the day. I shorted it twice and then took the break up.

 

[firewalker 10]

Done by 10:00 am today, but had I another contract, I'd still be in as we speak, since price has not really broken a significant swing point. Took what I could though and that made up for my full stop at the open. 1700 was my important level for the day. I shorted it twice and then took the break up.

 

My entries might have been 1pt different from yours, but I did exactly the same

Scaled out three times (purple dots on chart).

 

[DbPhoenix 42]

Extending an answer I gave in chat today in response to a question about VAP, the top of this particular range, according to price, is around 30. According to volume, it's around 25. So the answer to either/or is to use both and see what traders do when they reach each level. Clearly they demonstrated an inability to push price past 25 today. This doesn't mean that volume "wins" so much as that one has to be flexible as to how far away from the midpoint of the range one thinks traders are going to be able to get, or, if one wants to get into statistics, how many standard deviations away from the midpoint. And one can't know that until the trading takes place in real time.

[wjrusnak 10]

My entries might have been 1pt different from yours, but I did exactly the same

Scaled out three times (purple dots on chart).

 

My god... that is troubling. I am astonished at the similarity of our trading day. Even the part where I said I'd still be in had I one more contract.

 

EDIT: Seriously... I can't get over this.

[DbPhoenix 42]

My god... that is troubling. I am astonished at the similarity of our trading day. Even the part where I said I'd still be in had I one more contract.

 

EDIT: Seriously... I can't get over this.

 

Great minds, etc etc.

[Gringo 10]

My god... that is troubling. I am astonished at the similarity of our trading day. Even the part where I said I'd still be in had I one more contract.

 

EDIT: Seriously... I can't get over this.

 

Clones...Db clones...

 

Edit: It's a joke in case ridicule's coming my way.

Edited November 5, 2009 by Gringo

[DbPhoenix 42]

There's a chart here that nicely illustrates what I've been trying to say today regarding price and the mess in volume. There is by now no doubt that 20 is R. But even if price moves ahead overnite, there's still that hurdle at 25 to jump. OTOH, if we drop to 15 and get a running start.....

 

Interesting days, interesting days.

[DbPhoenix 42]

For wj, as promised (and firewalker too):

 

[wjrusnak 10]

On larger charts, we are inside the bigger range (1780 to 1650) and are right in the middle. Tomorrow that may give us some choppiness unless one side (buyers or sellers) decides to really push price.

 

 

Given where we are now, I'm going to look for S around 1710-1712 (if price would happen to get there) and even though we're sitting at it as we speak, a break up above 1720. Above that the levels are fairly easily mapped: 1730, 1740, 1750. Maybe buyers will break all three, or maybe they won't break any. Let the price action decide.

 

[DbPhoenix 42]

On larger charts, we are inside the bigger range (1780 to 1650) and are right in the middle. Tomorrow that may give us some choppiness unless one side (buyers or sellers) decides to really push price.

 

Given where we are now, I'm going to look for S around 1710-1712 (if price would happen to get there) and even though we're sitting at it as we speak, a break up above 1720. Above that the levels are fairly easily mapped: 1730, 1740, 1750. Maybe buyers will break all three, or maybe they won't break any. Let the price action decide.

 

It may also be worth pointing out that we are edging past the midpoint of the decline from 1780 and we are very near re-entering the channel. This may generate some nervousness among all those who've regarded this as a top.

[DaKine 10]

It may also be worth pointing out that we are edging past the midpoint of the decline from 1780 and we are very near re-entering the channel. This may generate some nervousness among all those who've regarded this as a top.

 

I believe this is the chart for this...

 

[wjrusnak 10]

1710 turned into 1708. I took the long there and that was really all I needed to do. My exit was a little crappy... I had my stop at 1723 after we hit 1726.75, as I thought almost 4 points would definitely be enough room to let them play. Got me out TO THE TICK at 1723 and pushed a little higher. My optimal exit would have been 1726. 3 points difference, but a great end to a great week. Done by 9:47am.

 

[DbPhoenix 42]

There's a chart here that nicely illustrates what I've been trying to say today regarding price and the mess in volume. There is by now no doubt that 20 is R. But even if price moves ahead overnite, there's still that hurdle at 25 to jump. OTOH, if we drop to 15 and get a running start.....

 

Interesting days, interesting days.

 

Well, we dropped back to 15 and somewhat below to support at 10 for our running start all the way to 20 and 25 to resistance at 30. And all in less than half an hour.

[DbPhoenix 42]

1710 turned into 1708. I took the long there and that was really all I needed to do. My exit was a little crappy... I had my stop at 1723 after we hit 1726.75, as I thought almost 4 points would definitely be enough room to let them play. Got me out TO THE TICK at 1723 and pushed a little higher. My optimal exit would have been 1726. 3 points difference, but a great end to a great week. Done by 9:47am.

 

Your post beat mine by a few seconds . Well played. Congrats.

[wjrusnak 10]

Yes, I'm pretty sure you called that out fairly well in foresight

[DbPhoenix 42]

Yes, I'm pretty sure you called that out fairly well in foresight

 

Planning it all out in advance certainly reduces/eliminates whatever stress one might otherwise feel.

 

Holding above the midpoint of the last decline (15+/-) is proving to be a challenge. But, oddly enough, price appears to be finding support here.

[DbPhoenix 42]

Having mentioned the "double tops" in XLB and I and the Transports, I should point out that they have all bounced nicely off support. Not to bias anyone, but barring sudden failure, we should see tests of the highs.

[wjrusnak 10]

So as Db mentioned, we're getting to some key levels in the overall market. This could give us some significant movement.... or not. Anyway, I'm looking at 1740 tomorrow for a possible break-up or a serious rejection back to the lows (this would probably be horrible for the buyers). We're just about at 1740 right now, so I would think that price could move toward 1731-32 overnight and possibly catch some momentum to get to the upside.

 

[wjrusnak 10]

Here's my random interest in the DOW Jones. This move from march has had its share of broken demand lines, which along with the lower "overbought line" (created by weaker and weaker upthrusts), signify a weakening in momentum. I'm no expert on volume yet, but from what I see, we have increasing volume on the recent lower dip to the nearest support, with decreasing volume on the up move of the past few days. So basically... sellers met buyers at support and gave up for a while and buyers can easily sneak back up to resistance. The problem is that buyers are going to have to find a lot more interest at the last swing high or they may start to have some issues (i.e. a pullback or a range).

 

 

Looking at extremely long term areas, we are right at a small point of resistance (10k), although I think 11k would be a much better point of R (I'm just one trader among many though ). In any case... setting up for a possible double top at R on decreasing volume. Looks like we'll have to see what the buyers are made of this week.