So Far So Good

Apologies for my relative absence today – for one until now there was little to add to yesterday’s perspectives, and second I’m running a bit thin on time today. So let’s cover the basics:

2014-08-28_spoos_upate

If you recall – I pointed at the 100-hour SMA as our inflection point for a drop toward the lower Bollinger. That very scenario played out overnight and since then we’ve bounced back and are in the process of recovering the SMA.

2014-08-28_uvol_dvol

It’s possible that this was simply a little stop run to shake out some weak hands. The UVOL/DVOL ratio seems to suggest just that. If you look closely the previous sessions ran pretty much on remote control but last night’s sell off took a few folks by surprise (strangely) – at minimum it triggered a series of stops. Now we need to hold the 1996 mark in order for the party to continue – if we drop back below and the cash closes in the red then we probably are looking at a more extended correction. In which case I may consider closing out some of my NQ longs – thus far they’ve barely broken a sweat.

2014-08-28_copper_setup

Nothing of substance on the setup side today – except copper which is looking like a pretty good long here. Now don’t read this the wrong way – I’m not saying that copper has high odds of jumping higher. Actually, it’s more of a 50/50 scenario - however we are sitting on double support and that puts the odds in our favor IF (and only if):

  • We close above the NLSL and SMA today.
  • We hold that mark into tomorrow.

So I am taking a calculated risk here near a potential inflection point – 50/50 odds right now but it’ll increase rapidly the more time we spent here. All that translates into a potentially high payout for a small risk (i.e. my stop is but a few ticks away). Ergo I’m attributing 1/2R here and then will add 1/2R if not stopped out by tomorrow after the NYSE open. If she holds here then a jump higher in the coming week would have very good odds.

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How To Let Your Winners Run

It’s Monday morning and I’m not going to bore you guys with an exhaustive reflection on why traders should adopt a policy of cutting your losers short and letting your winners run. If you haven’t caught on to this very basic tenet of trading survival 101 then you either are new here or haven’t been paying attention.

2014-08-25_dollar_briefing

Instead I’m going to let our charts do the talking as the two specimen at hand should be considered textbook examples of how a strong trend can extend to unanticipated highs (or lows in the context of short campaigns). The Dollar campaign actually started as an hourly entry which then got converted into a daily setup when it breached a NLBL. I did make quite a fuzz about the long term implications of the inflection point at hand during that time. Unfortunately judging by the comment section it got either ignored or you guys simply disagreed.

Whatever it may be – the tape started to move in my favor for about two weeks, at which point ole’ bucky entered a sideways correction below 81.7. I could have taken partial profits there but given the squeeze potential I simply advanced my stop a healthy distance away and was able to sit things out. Now there is no real recipe for doing this properly – it takes a bit of finesse but my general approach in a nutshell is to gauge daily/weekly momentum and consider the squeeze potential that may feed continuation of the ongoing trend. In this case my verdict was to ‘let her run’ as they say. Currency markets move quite different from equities – so do futures by the way. Once a trend gets going it truly is your best friend.

2014-08-25_NQ_briefing

Similar example here on the NQ – it’s pushing 5R and I simply keep my stop a healthy distance away. In this case I’m using the NLSL at 4032.75 – which would cost me over an R in profits but once again I am unable to determine when we’ll see a correction. Given the fact that we had eight consecutive higher highs the odds are now ridiculously high (i.e. in the 98 percentile) that we’ll put in a red candle or two. If we do I would like to ride it out – hence my stop – low enough to sit out an obligatory correction but near enough to get me out if it turns into a sharp correction. Again, there is no crystal ball and it only will be clear in hindsight.

2014-08-25_spoos_profile_briefing

You may wonder why I’m not running to the bank to cash out right here and call it a trade. That reason should be apparent – we are in absolute no-man’s land and there is no context. A lot of folks are going to try to pick a top here and that’s exactly why I give this trend fair odds of continuation. If I was in cash up here I would wait things out as well – there is no reason for me to short this tape right now. Similarly I simply hold my longs and advance my stops as needed and per my best objective judgment. Whatever happens – I’ll be happily banking coin as it is – given that I am representative of strong hands who got their entry early (either due to skill or sheer luck) and aren’t really worried about missing an R or two.

Anyway, if you’re watching this campaign from the sidelines don’t spend your energy kicking yourself for having missed out. Instead take it as a learning experience for the next time when you manage to get a good entry and the tape starts moving aggressively (in your favor). Being able to simply sit and do nothing is half the battle.

A now to a few short term setups for my intrepid subs:


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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,

Tuesday Morning Briefing

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.

Steady as she goes on the equities front – the cash is now in earshot of its 100-hour BB which is just a bagel throw away from our 1980 inflection point. Recall that this is where the bears throw down their claws and embrace their ignominious defeat. A little correction near here would be nice – just to throw everyone off a bit.

However a pop above ES 1972.5 (the current hourly NLBL) looks like a good buying opportunity given the 25-hour SMA right below it. Much potential for a pop higher with minimal risk – you can play this one with 1/2R and if it happens (odds are low) then you’ll probably be rewarded with multiple R returns.

I got two precious metals setups today – the best one I keep for the subs but silver ain’t looking so shabby here either. Long right now with a stop below 19.65. The big hurdle will be 19.75, which is where silver runs into its old nemesis – the 100-hour SMA.


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Please login or subscribe here to see the remainder of this post.

Cheers,





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    1. So Far So Good
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