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 January 21, 2004
Commentary-
Today was a wonderful object lesson in why I
keep saying that I'm leaning on the long side until proven wrong. Sure,
we are going to get a correction, and perhaps it will be pretty aggressive.
That's all fine and good. But right now we are going up. New contract highs in
the ES and a new high for the move on the INDU and the NASDAQ comp, again. This
is why I don't 'second-guess' when I think a correction is going to
start.
Today I will continue following up with what I am doing with VTSS
and FDX, and I'll also show a trade that I found in the ES today. I'll start
with VTSS.
VTSS followed through a bit on the downside
from yesterday's aftermarket action, and then started to turn up. It finished
up on the day, with a close near the high. Based on this strong action, I
stayed pat with my remaining position. I'm going to let this play out and see
where it goes from here. I'm not going to guess what I think it might
do.
Next, let's take a quick look at FDX.
FDX was looking weak yesterday. As I
mentioned, I did a 1/5 scale out when it started dropping from the high. I sat
tight with the rest. Today FDX opened near what turned out to be the low of the
day, and after a good sized pullback/test of the low, it went up for the rest
of the day, finishing near the high.
It traded the exact high from yesterday at
$70.32. It's not clear on this chart that the highs were the same because
Tuesday's data has a bad tick up to $70.40 that was erased on the intraday data
but hasn't been erased yet on the daily data. I see FDX recovering the entire
pullback and finishing near the high as a bullish sign.
That's not to
say that this isn't a 'retest' of the high, and then it'll drop like a rock. My
thoughts on that are: could be. There are some factors indicating this is a
potentially strong resistance area. On the other hand, this trade has context
from the weekly chart.
It's a battle, and here's the area where we'll see which
direction will predominate, at least for now. But there's not much I am going
to do about that now that I'm long. If the area isn't going to be breached,
I'll scale out on the way down. And if it is, I'll follow my plan for
that.
As I mentioned yesterday, the only use I might make of looking at
possible support or resistance areas is if I use that to revise my management
strategies. But even then, I'd still want FDX to prove to me it was
going down. So the bottom line is, I'm just watching this one, and letting it
play out. As an aside, I think it is going to do whatever the general market
does from here.
Let's look at a trade I found on the 13-minute ES chart. I saw an
ABCD pattern set up after the early morning sell-off. I put several alternate
ABCD groupings on the chart, and waited to see how the ES reacted in the area.
I'll show the first grouping the ES hit and reacted to.
What made me suspect that this grouping was going to be
it was all the congestion directly to the left on the chart. I had put several
horizontal lines (not shown) on my chart, to see where they fell with respect
to my groupings. If I got an entry
trigger I was going to get long.
Even if there was a bounce and
rollover, that was fine with me. I felt this was a high probability area. I'm
still thinking long until proven otherwise. And look at your charts. They seem
to love to pick it up at or near previous swing-lows. That's why I keep
pointing it out. Let's see what happened.
This one was tricky for me. I used the 3-minute chart
for the trade, and it was wild. It took several tries to finally get on board
to stay. One aspect of my management plan has me scaling out when a pullback
starts to really get going against me. Usually all of the scale-out points are
above my entry point, if there was some kind of thrust off the entry
area.
If it then starts right back up, I look for re-entry. That's just
my particular style. This one took me three tries to finally hit it right. If I
put my stop below the grouping, I would have got it on the first try. If I was
trading this with the 13-minute timeframe as the traded timeframe, that's what
I would have done.
I would have had to hold through 3.5 points pullback on
that first retracement, to below my entry, though. And a stop below the
grouping would have a 5-6 point give back if it kept going. That's just not my
style for this type of trade. I'd rather make a small amount, or scratch a
trade, once or twice and then catch it, as opposed to take a full sized stop
out. That's why I opted to use the 3-minute timeframe for the trade.
The market is
at a critical juncture in this area, but it sure looks like it wants to keep on
grinding up. I'll just keep hitting the longs that set up until this thing
really starts to go off. Then I'll play it that way until it reverses. It makes
no difference to me. It's harmonic both ways, and I can always find patterns
and groupings that are in the flow of the larger context (read that again; it's
obvious but seldom used).
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