Book: Kane Trading on: Entry Techniques
December 17, 2003 Commentary-
Today was a very interesting day for intraday trading, even if the ES spent most of the day in a fairly narrow range. I decided for today's commentary to focus on just one particular trade sequence that I played with today. I saw a setup forming on the NQ on the 3-minute chart. Let take a look at the chart as things started to come together.

Chart 1
I highlighted an .886 retracement on this chart just to show one aspect of the behavior that I was looking at. As soon as I saw what was shaping up, I put a grouping on the chart. I'll also highlight the pattern that caught my eye.

Chart 2
Now as soon as I had my grouping on the chart, a particular aspect of this trade came to light. Scott Carney over at Harmonic Trader had made a call this morning in the exact same area, except his call was posted before the latter action on this chart had even happened. His call came from the overnight data, and a setup that came together based on that data.
And the NQ then went ahead and formed this setup, pointing to the exact same area. Those random walkers, I just don't know how they can think it's just another random coincidence. Here's a little harmonic trading humor. Question: What do you call a hundred coincidences in a row? Answer: Non-random. Well, I think it's funny.
Moving on, let's look at the NQ as it gets close to the potential trade area.

Chart 3
So, did you start looking for your entry trigger in here? That's up to you. I waited for more penetration on this, but if you were willing to take a little 'heat', you might have been looking. Traders have to decide for themselves if they want to 'jump the gun' a little. Let's see what happened.

Chart 4
The NQ did go back and hit the grouping dead on. There were two harmonic setups, from two different sets of data, right in this area. I was looking for my entry trigger after the NQ touched the grouping. Let's see how it played out.

Chart 5
There was a nice thrust up from the grouping. The NQ ran 11 points with barely any rest. Then it rolled over and they pounded it. My play was to scale out at various points along the way. I didn't care that it rolled over, the thrust was my play, and I played that. That's why I wrote Kane Trading on: Trailing Stops, so I could have a plan to maximize the run and then get out.
I played the pattern on the 3-minute chart. That doesn't have me hanging around beyond my welcome. But I also had something else in the back of my mind. I felt that the likelihood of this thing resuming the uptrend after such a harsh sell-off was very likely. After all, there were two solid setups at that reversal point. So I was looking to re-enter a long trade.
That sell-off ended right at the .786 retracement (not shown) and when it started to head up strong, I took the first trend continuation signal that I got. The NQ ran and closed on the high tick for the move off the grouping. The NQ was just behaving very harmonically, and the INDU were blasting off to new highs, taking out the gap high from Monday. All I knew was that I saw an opportunity for another leg up and I looked for a trigger. All in all it was some great action today.
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