Now Reading
Love Those Pennants
51

Love Those Pennants

by The MoleMay 25, 2011

Basic charting patterns – we have all used them, in particular early on when we got started. They offer gentle comfort and an easy to grasp paradigm introducing order into what previously appeared to be nothing but random noise or chaos. I personally am not a strong proponent of charting patterns and only use them in strict moderation. And when I do I actually apply them a bit differently – or call it a bit more deviously. One of the main reasons is that it seems to me that the weakest aspect of charting patterns are the rules defining their final resolution:

The generally accepted notion is that a pennant is a continuation pattern. However if you follow that link you will see that the odds are tantamount to a coin toss, so why use them in the first place? Actually they can be very useful if you think outside the box (or flag in this case). See, I really don’t worry about the direction – that’s for the suckers on the other side of my trades. What I care about is the breach of the pennant’s boundaries. A very recent (and profitable) example was Silver for instance:

As you can see this little gem was coiling up, even painted some dojis, and I am sure many PM bears were salivating to see a continuation of the previous plunge. If you were a Gold subscriber you would however have taken whatever candle breached that boundary and it just so happened to the long side. Ergo – my subs banked some mighty coin and the rest of you got to chase it.

Why do I trade this way? Because one big lesson I finally learned (after paying a hefty price over and over again) is that direction means nothing and that resistance/support is everything. And those latter two just so happen to change on a daily basis and can also easily be manipulated by large institutional players.

So what was supposed to go down suddenly goes up, which exactly ties into Scott’s prime directive which is that if something is supposed to happen and it doesn’t then the odds support that the exact inverse will happen and most likely with some vehemence.

I have another example of a ‘failed’ pennant that seems to be repeating Silver’s very move right now. Fortnately it’s not too late to take an entry:
[amprotect=nonmember]
Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect]
[amprotect=1,9,5,2]

That’s right – crude not only breached its own pennant’s upper boundary – it also looks like it’s going to close above its NLBL today – which technically expired yesterday per Chris Carolan’s rules. There are no guarantees but a long position here seems to have decent odds. A nervous stop would be at below today’s lows – a more conservative one a few ticks below the pennant’s lower border (at which I would actually consider it a failed break out and would reverse positions).

Cheers,

Mole
[/amprotect]


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://thebhbgroup.com TheBHBgroup

    i have no edge all day and have been trying to figure out the next move….sticking to the sidelines still.¬† Looks like it may be a 1325 retest on the ES that we are seeing today.

  • Anonymous

    let me point out, that this “outbreak” came without any significant volume increase.

  • Anonymous

    The only thing that keeps me from going long now is the zero

  • http://evilspeculator.com molecool

    Well, what does these days…

  • http://evilspeculator.com molecool

    Okay, fucking disqus is driving me bonkers recently. When I press on the ‘post as molecool’ button below for some reason I get switched to a different Firefox window. Secondly, when I start typing it indents it by one character – so I always have to step one character backward.

    Is anyone else experiencing this crap?

  • jigdaddy

    nope but that sounds annoying…i can see you getting very angry in your evil lair…and as fucked up as it sounds, i cant help but LOL ūüėČ

  • Anonymous

    no “post as molecool” button problem here.

    otherwise: indenting, yes occurs a bit randomly methinks and¬† occasionally “no typing allowed error”.

  • Anonymous

    true, true…

  • nyse

    Yes. It is brutal. Switched to Chrome…

  • OllyVaradi

    I’lll tEll you ¬†oone (*th>ing0 DDisdus is !)oing ¬†meein 2%

  • tradingmom

    All the time.  Deterrent to posting.  ALso, zero not updating as of 5 min ago.

  • Anonymous

    I’m using Chrome so no, that hasn’t happened to me. ¬†Yet.

    However, the latest issue I have is that a few weeks ago, Disqus arbitrarily decided that it wasn’t going to send replies to my posts to my E-Mail Address anymore. I was able to get around that by checking the “Dashboard” for replies especially after we’ve gone on to a different Thread. ¬†So now my Dashboard doesn’t work properly and says that I have no replies. ¬†Ever! ¬† This is pretty fucked up. ¬†

  • http://evilspeculator.com molecool

    Yours would be named ‘post as gsavli’ – or ‘post as knucklehead’.

  • Anonymous

    might be. “post as molecool” seems to be hidden or even outright missing.

  • http://evilspeculator.com molecool

    Seems to be working right now. Anyone else?

  • LilSpaniard

    My ZL is not updating

  • tradingmom

    stuck at 15:27 New York time.

  • LilSpaniard

    It’s back, thx

  • Anonymous

    Mole, ZL stopped working for me.

  • OllyVaradi

    I think he’s under the desk now taking the vacuum plug out, putting the server plug back in and soon as he’s thrashed the Mrs., he’ll be back.

  • http://evilspeculator.com molecool

    You have no idea how close to the truth that was.

  • http://evilspeculator.com molecool

    yeah yeah – it’s back on again – sorry folks…

  • Anonymous

    False alert. It’s working again…

  • OllyVaradi

    Yeah, me too. I’ve re-booted twice but mine’s missing too. I’ve only got “post as Olly Varadi.”¬†

  • Anonymous

    yea, that’s kinda lame, i want my “post as molecool” button.

  • Anonymous

    crappy disqus.

  • Anonymous

    Yah me too. Since yesterday.

  • raised_by_wolves

    BobbyLow, my Disqus tragicomedy is the same as yours. First, it was no email replies and now its a dysfunctional dashboard.

  • Anonymous

    It’s just before the close, are we betting on the black or the red…or not betting….???

  • Anonymous

    Thanks for telling me that because at least I know I’m not the only one. ¬†¬†

  • Anonymous

    News weren’t good but tape rallied. Qe3 play
    so far until Benny denies it. PM act this way.

    For a couple of days, very violent ups n downs
    took place IMMEdiately after after-market hours closed.
    Future traders are driving the bandit wagons.

  • Anonymous

    Failed retest of 50 DMA

  • raised_by_wolves

    We’re special.

  • raised_by_wolves

    I, for one, am betting on blood.

  • Anonymous

    Is that bloody enough?

  • Anonymous

    Well today my trading sucked worse than DSK’s maid. Got stopped out by this “bull trap” just before the EOD flush. Serves me a lesson. At least I did not go long.

    Oh well tomorrow is another day. I’ll catch the bus on its way, to wherever it finally decides to go.

  • Anonymous

    This market is really full of shit.

    Today, I went from being mentally adept to pretty stupid, to being real stupid
    to a fucking idiot, to real stupid, to pretty stupid, to being mentally adept..

    I actually ended the day slightly positive on a day that seemed to take me
    for a ride all over the place.  

    Mole you need to put out the picture of the Monks on the Roller Coaster again.  :)

  • volar

    great post mole. . . would be the reason why I went from short to long crude (Scott also suggested). Generally I have found if I am wrong, i am opposite of right, so i do the opposite of what i am doing.

    I have never used carolan’s stuff, but I dig it.

  • http://evilspeculator.com molecool

    For real – this tape is extremely treacherous – which is what I have been saying for a while now. Treat carefully…

  • Anonymous

    The George Costanza play. Nice.

  • http://practicalt.blogspot.com/ Gold_Gerb

    Because one big lesson I finally learned (after paying a hefty price over and over again) is that direction means nothing and that resistance/support is everything.

    Amen Brother! preach it! ¬†-( actually made coin today R line to R line , i’m a little emotional.)

  • http://practicalt.blogspot.com/ Gold_Gerb
  • Anonymous

    Mole,
    Could you update the daily zero please?
    Thanks

  • Anonymous

    Your attitude is all wrong. Your trading was PERFECT if you lost money but traded perfectly according to a well thought out plan.

    You cannot control the market but you can control what you do when the market does what it does.

    The attitude “I traded well cos I made money” and vice versa, is sure to send you broke.

    Strive for perfect exection of your plan, its the only way to trade :)

  • http://evilspeculator.com molecool

    Done!

  • Anonymous

    I m in your good company. Screwed by whipsaw.

  • http://practicalt.blogspot.com/ Gold_Gerb

    ..treacherous.  tops are rounded.  does this look like a rounding?
    we are on the edge IMHO.
    http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=1&mn=0&dy=0&i=p46575321272&a=235178391&r=1000

  • Anonymous

    Thanks. ¬†Hmmm a lot of divergence in the daily and a good chunk of POMO days still avail. ¬†Gonna be interesting…

  • volar

    Word. I will add that one must make sure the plan has an edge and and edge that does not have too big of a draw down.

  • Anonymous

    Thanks for the moral boost, CS. 

    Just amazed how those fuckers shotgunned my plan. Stops too tight.

    What’s your take on Wednesday’s action?

  • Anonymous

    Learned that too.