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 December 16, 2003
Commentary-
Today was quite interesting, and very
harmonic. The selling did stop, and the almost obligatory bounce came right on
cue, right in the 11:15 AM area. I wasn't expecting that, was I? You'd think
they would mix up the times once in awhile. Let me start with a 60-minute chart
of the ES with an .886 retracement on it.
I had this .886 on my chart, watching to see
what might happen there. It was an area that I had some keen interest in. As
those that follow me know, this is a retracement that I discovered and then
outlined in Kane Trading on:
Advanced Fibonacci Trading Concepts. I consider it the best single tool
in my trading arsenal at this time.
As an aside, I was quite amused and flattered
with a promotional spam that I received the other day. It was for a fantastic
new Fibonacci software or course or something, I tried not to pay too much
attention to what it actually was. I followed up the link for fun, and saw a
very nice image of a chart with some Fibonacci numbers on it. And right there,
sticking right out for me to see was the .886 retracement.
Now, do you
think I was credited for having discovered this? What do you think the odds are
that this gentleman even knows who I am? The ironic part is that he sent me a
spam to try to convince me to buy his product, not knowing the retracement he
was proudly highlighting was my creation. I just thought this was a funny
enough story that I wanted to share it.
Let's see what I did with the information
from this last chart. Although the same opportunity arose on the ES chart, I
chose to play the NQ on this one, because I just liked how it looked and how it
was acting at the time. I'll drop down to a 3-minute NQ chart to show what I
was looking at.
Look familiar? Let me highlight the pattern
and show my grouping. I'll also add in retracements for the B and C points, to
show how incredibly harmonic this thing was behaving.
Hmmm, Jim, what is that retracement at the B point? I'm
not sure I've seen that one before. Well, you can derive it directly from Phi,
the Golden ratio (1.618). How I use it, why I derived it and how it's derived
is all in Kane Trading on: Advanced
Fibonacci Trading Concepts. Soon you'll all be getting spams from all
these vendors and they will have this number in it, along with my 1.902. But
you'll know where it came from.
At this point I just sat back and waited for
my trigger. Let's see what happened.
It was a wild, choppy ride up, but the pattern and grouping pointed
me to the right spot. The 60-minute gave me idea that the low might be in, and
that hit at a well-known reversal time. The 3-minute pattern and grouping gave
me the setup. I found a great trigger on the 1-minute timeframe.
Before we move on, take a look at the run up. See any continuation
ABCD patterns in there? Those kinds
of patterns are among my favorite ways to trade.
I'll finish
with something interesting I wanted to point out. I threw my .486 retracement
on a 13-minute ES chart, to see where that landed. Let's look at that
first.
I wanted to see if they were
shooting for any particular targets, or if the run up just stopped at a
'random' spot. I then checked to see if other major numbers lined up with this
.486 retracement. I added on a .618 retracement, a .786 retracement, and a
1.618 external retracement. Let's see what they told me. I'll leave the lines I
used to generate the retracements on the chart so that you can see what I've
done.
That's pretty amazing. They all
converged within two ticks. The .486 was actually the closest to the high for
the day.
Now, am I saying that's it? It will reverse back down
now? Of course not. I'm pointing out an awareness area that I am looking at.
The daily timeframe says up, and this is only a 13-minute timeframe. But if
this thing is going to fail, here's an area that I'm watching.
I now start to watch the behavior, and if I get a trigger, I may
make a play. Perhaps it gaps open over the area. So be it. What's important to
me is to know where I should go on 'heightened alert' and look for potential
entry triggers. For me, I'm watching in here.
I'm
completely over the time and space limit for tonight, but look at AMLN. I'll
get to telling you what happened, but it'll have to wait for now.
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