Book: Kane Trading on: A Totally New 5-Point Pattern
October 30, 2005 Commentary (weekend edition)-
I have only one thing to say about this past week: WOW! I've just never seen trading action so good, in my experience. The Russell mini, where I focus almost all of my intraday time, has just been out of this world. I also follow the ES tick by tick, too, but I pretty much prefer the Russell in almost every case. Now, this is in now way (and I mean no way) a claim (since I make no claims of any kind), but I posted a chart for the last members' commentary on Friday's action in the intraday Russell, and it had eleven setups on there, every one of which 'worked'. And if you don't think I can see these in 'real-time', please e-mail me and we'll get you set up for some time in the Harmonic Trader chat room where I 'hang out', and you can get an answer to that question first hand for yourself.
The market has also been incredible for the higher timeframe action, too, in my opinion. It has been bouncing from line to line to line for me, while the clock spring coils tighter and tighter before the next big trend move. I've reached a new level of amazement at how these things react off the areas I find (and frequently post ahead of time in the members' area). I'm not bragging whatsoever; I'm just expressing my usual 'kid in a candy store I'm just blown away by what I'm seeing' routine. No matter how long I live, or how experienced I get I will not only never ceased to be amazed by the market, I suspect I will become even more amazed, since I am seeing so much more as the days go by.
Let's continue with the theme of following up on the chart I posted in the last Jim's Chart of the week. Here's last weekend's chart.

Chart 1
The first two arrows were 'actions spots' I was watching as they unfolded, and they really produced reactions. Now a fifth touch of the downtrendline was at hand, just under the median line. Using another offset line variation I explain in Kane Trading on: Median Line and Fibonacci Synergy, that line would also hit right here. I didn't show any numbers here, just the framework of what I was looking at. I suspected this would 'blow out' the area, and if I got a specific setup, I might be able to get a long opportunity. This is a setup I see with a lot more frequency that one might suspect it would form, and it is a primary thing I look for.
Let's jump right to where this is today, and then we'll drop down in timeframe and analyze this.

Chart 2
PD did launch right through the area, going right up to the exact spot of my next offset line (again, I explain all this in MLFS), where it rolled down hard. And where did it go? Right to the median line lower parallel, where it reacted. But the question is did I play this as a 'breakout' trade setup? Well, anyone who knows my methodology at all knows I play 'breakouts' as often as I use 'profit targets', and that is, pretty much never. No, I have a specific thing I'm trying to do here.
Let's drop down to the 15-minute chart and look at that.

Chart 3
I just showed the downtrendline and the lower parallel here. The median line was just above all the action, intersecting the downtrendline. The first two arrows show the last two spots I showed on the daily chart. How clear is that? The third arrow shows the reaction off the second arrow drop to the lower parallel, which is not that clear on the daily chart. The wedge is tightening, and I wanted to see an ABCD in the area of that upper line. I got it, right on the open on the 24th. Now I wait to see if I get an entry trigger. Let's see what happened from here.

Chart 4
PD triggers beautifully and runs about 10 points with one small pullback, shown at the area of the arrow. And what structure did that pullback take on? Yes, another ABCD. At this point PD did exactly what I suspected it might, based on the daily chart. It rolled over and dropped like a rock, giving me a great opportunity for a short right in there. Go back to the daily chart and take a look at that. PD is one of my favorite trading stocks of all, and I follow it incessantly. It has a real nice trading rhythm to it, and I can frequently 'read it like a cheap novel'.
Let's wrap up with some follow up on that 10-year treasury we looked at last week. Recall that this is a continuing follow up on this from a Jim's Chart of the Week from before. (For those of you that don't know what I mean here, if you go to the home page and look in the upper left hand corner you will see a link that you can click on that will pop up my 'chart of the week').

Chart 5
The ZN did exactly as I mentioned last week, and rolled over just like it was a 'wave 4'. It went right through the first alternate ABCD and line area, and just about down to the next area (remember, I look for areas and not exact to the tick spots, and these three are really 'sub-groupings'). Now I see what it does from here. Remember that I showed this as an 'action spot' in the area of the last arrow, and showed how I was triggered on the 15-minute chart in a past commentary. That 'wave 4' bounce was structured as an ABCD, too.
As I close, let me mention that the market still has not made a decision as to which way the money is going to flow. Look at the dollar index, the Euro, gold, energy, and the treasuries. I am of the opinion that's why the stock market is bouncing like a yo-yo from line to line. This makes for awesome intraday trading in my opinion. The coil is tightening, and I suspect that trend time may be coming very soon.
I had a great time mentoring this weekend, and I still managed to get this commentary to everyone 'on time'. Sometimes I wonder why I like working so much. Then it hits me that I'm a lot happier working a hundred hours a week for myself than forty hours at a 'job'. The next commentary will be next weekend's edition, posted by Sunday evening November 6, 2005.
  NOTE: Reading this page or any page on the Kane Trading website, or utilizing this website and any material
  contained herein in any way, shall constitute an acknowledgment that you have read, understood and agreed
  to all the disclaimers, terms & conditions, and policies of this site
.
This website is best viewed with MSIE 6.0, text size set to medium, and screen resolution set to 1024 by 768.
Copyright © 2005 Kane Trading. All rights reserved.