|
|
|
|
January
30, 2005 Commentary (weekend edition)-
Today I'm
going to show something from the ES that came together on Thursday. First,
though, let me remind everyone that my new subscriber service
launches on February 1. If you want to sign up using the subscription option,
be sure to do that before Tuesday. It will still work regardless of when you
sign up, but the subscription runs by the calendar month so it is best if you
sign up by month's end. So far the interest is pretty good, and I expect it
will grow as word spreads.
Let's get to the charts. A setup was coming together in
the ES on the 3-minute chart. I'll start by showing the setup, along with one
retracement.


The B point retracement at a .786 (by the
arrow) tells me the setup is a potential Butterfly pattern, so normally I
concentrate around the 1.272 external retracement area for my grouping. I'll
add that grouping onto the chart.


As I was looking for 'context' on this trade
I noticed an interesting upper-boundary trendline. The ES has been range
trading with an upward tilt, and my longer timeframe bias was downwards. Let me
show this line on a 13-minute chart.


Although I don't like trying to short off
range tops, if my bias is downward and a pattern emerges with a reward/risk
setup that I like, I'm not opposed to playing it. I'll show this line on the
3-minute chart, along with another line I saw.


Although the additional line I added (sloping
up from the bottom left hand side of the chart) seems quite unusual, it's one I
use frequently with certain pattern setups. These lines had me wondering if a
lower grouping may not be the place to watch, or at the least to have it on the
chart to see how the ES reacted to it. I'll show what I came up with.


This multiple groupings technique is right
out of the books. This grouping
is right where those trendlines are coming together. I want to watch the
reaction in there. Note that although these are two distinct groupings, it's
still less than a point and a half from the top to the bottom of both of them.
I can't expect the ES to reverse to the tick on every grouping I build. This
gives me the area that I now watch for a reaction. Let's see what
happened.


The ES overshot the lower grouping by just
over a tick and put in the high bar right at the intersection of the two
trendlines. The ES tested the area multiple times, but never threatened any
kind of price stop I would have chosen. Some may have chosen a time stop and
not held this.
After a sharp rally from the low shown on this chart the ES dropped
down another 4 points. Note the pullback retest entry at the lower boundary of
the grouping, too. As a last note, take a look at the pattern that formed after
this current pattern fully played out. Talk about one pattern after the
other.
That late day ramp came right off another clear pattern which was
never violated at all, but probably shook everyone out on a time stop as it
went sideways for hours on end. That ramp came right off the pattern without
ever threatening a stop set below the grouping. I'll leave it as an exercise
for the reader to put that latter setup together and study it.
The next
commentary will be next weekend's edition, posted February 6. I hope to see
many of you in the members section on Tuesday.
 |
|
|
|
|
|
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.
 |
|