Book: Kane Trading on: A Totally New 5-Point Pattern
March 20, 2005 Commentary (weekend edition)-
Today I'm going to quickly cover one item of business, and then we'll look at some charts. I recently discovered an issue on the website where a security certificate warning was erroneously popping up when one went to make a purchase using any of the PayPal buttons. I explained this in detail in the recently updated What's New section, and how I got that corrected. Please check that out, especially if you went to make a purchase and got 'scared away' because of the security certificate warning. Everything is working smoothly now.
I had a tough time deciding what to show today. I was originally thinking I was going to follow up on BRCD, which has been following my script to the letter. The pattern I hinted at caused a reaction, and not only that, pretty much the reaction I expected. It then went about exactly as far up as I expected, and rolled right at my area, and triggered a great short opportunity.
See if you can do a workup on this one and figure out what I have been watching. This stock is truly amazing and one of the most harmonic issues I have ever seen. Perhaps next weekend I'll detail all this. In the meantime, see what you can come up with to compare with what I will present.
Instead of BRCD I decided to show one in the ES that I posted to the members' section this week. It is just chock full with my thoughts and assessments, and shows how I use some things in addition to the usual Fibonacci groupings and patterns to seek out the synergies I want for my trading. The nice thing about the members' section is that I can post things like this as they unfold, if I choose to. The quotes show the text I lifted from that section. Note that // is shorthand for 'parallel'.
"Today I'm going to show some of the factors I have been watching in the ES on the timeframes on the upper end of the intraday region, around the 60 and 13-minute areas. I'm going to show how these may influence my potential trade premise formation. In other words, what I am weighing in when I start to formulate some potential trade ideas. These tactics apply to any timeframe and any liquid trading issue, as far my experience goes. Try to focus on what I'm thinking, and not on the fact that it's not the issue or timeframe you work with.
Let's start out with a 60-minute chart, with just a few things I am looking at.

Chart 1
I am watching what this parallel line set shows me (as I said, this will duplicate the modified Schiff ML set, which I can't do with this charting program). I also added as best as I could a median line. Notice how one choice for an ABCD hits that lower line (also, the black lines for highlighting the ABCD do not have any technical significance, even though the last bar I showed just happens to be right on the line).
You can see how this can guide my thinking. Let's move forward a bit and see what happened from here. I will add something else in that will set up my main point for the day.

Chart 2
The ES hit the line, bounced, rolled over, hit the line again and reversed right up. I looked to see what retracement hit that median line, and saw it was the .300. The ES promptly went right up to that. Let's move down to the 13-minute chart and see what we see there.

Chart 3
Take a look at that additional line I added in. It intersects the ML and .300 retracement in one spot. But there's more. Look at the structure of the move into this area. That's as clear of a 5 wave as I have seen. Let's drop down to a 3-minute and look at some more detail.

Chart 4
Look at the clear 5 wave into the area, and how another ML set guided me. Notice that a nice looking ABCD (the wave 4) dropped below the ML lower //. This set up a thrust up to not only the intersection of the two other lines and the .300 retracement, but the lower ML // for this set, and this last set was quite 'proven' to me by them.
Can you see my thinking and what I'm watching here? I haven't even done the full fib workup or anything here for you. I'm just showing you what is right there, and what shapes my thinking to some extent. I must work this into my premise, as it's just too much to ignore. Let's see what happened from here.

Chart 5
Well, it didn't really surprise me to any great extent when this rolled over dead bang right at that spot. Now look at the run down. Just look at that ABCD about half-way down. Add-on spot for me? Open another trade? Scale out and re-add-on? Then what happened? Look at the ABCD that formed, with an ABCD in the BC leg. Is that crazy, or what?
Now where is it? What do you see here? There is just one setup and pattern after another. This never seems to end. I just sit around and wait for things to come together, and they do. I am only interested in trading when I have a setup. "I never try to predict the market, I just look for setups." And there are endless setups."
It's really amazing how all this comes together and how clear it can be at times for me. I am able to find things like this across the board on all timeframes and all issues. I am watching stocks, FX, commodities, minis, on everything from tick charts to monthly charts. I find the methodology applies for my trading in any liquid market.
I detail all this in the books, except the median line work I am doing. I definitely have enough material to write a book on how I use those with my 'usual' methodology, but as I have said many times, I hung up my pen for now, so I'm just not going to write another book at this time. Plus, I just don't have the time, even if I wanted to. But I do have some unique insights, and it sure would be a cool book…
The next commentary will be the next weekend's edition, posted by Sunday evening March 27, 2005. I will likely do the BRCD follow up, unless something better comes along.
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