Kangaroo Steel Rats

Kangaroo steel rats, genus Dipodomys Ferrous, are small market participants native to North America. The common name derives from their bipedal form: as they hop in and out of trades in a manner similar to the much larger Austrialian kangaroo trader (i.e. Convict Scott), although they are rumored to communicate online they are not related.

Kangaroo steel rats are six-toed endotherms with large hind legs, small front legs and relatively large heads. This gives them superior analytical skills and the ability to change trading directions by quickly executing a large number of positions in a matter of seconds. This is still mostly done by open outcry as the kangaroo rat’s stubby little paws are too short to reach any keyboard. Unlike the Gold Gerbil who is a more social and obnoxious animal the kangaroo rat prefers to hang out in its burrow during the day and becomes active mostly during after hours tape.

The favorite setup of the kangaroo rat is an inside day after a large candle up or flush to the downside. It has no directional preference and will jump on any setup that presents itself. See the example below:
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Presented with setups A or B the kangaroo steel rat would not hesitate to take either of them. Example A shows an inside candle which eventually resolves to the downside, therefore banking it some mighty coin. Example B, currently active, shows an inside candle which still could resolve either way. The kangaroo steel rat would patiently wait until the high of the previous candle is breached and then take a long position with a stop near the low of the prior daily candle. Other stop mechanisms exist depending on the setup and the rat’s trading rules. It’s a simple but effective trade which affords the kangaroo steel rat to get positioned in the right direction with minimal risk.

A failure of the inside day long setup may result in the kangaroo steel rat’s second favorite trade – the retest variation sell setup. In this case the nifty little rodent would wait for a breach of the current daily candle’s low and then leverage its mighty hind legs to jump into a short trade with a stop near the high of the prior candle.

Either setup raises the odds of survival and continued prosperity for the unbiased kangaroo steel rat.
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Cheers,

Scott’s additional information.

We have setups here both to the upside and downside. Mole has it covered, but I have a little more detail on both.

The potential long setup is a FAKEOUT INSIDE PERIOD

The rationale is similar to the fakeout. On breaking the previous spike low, we *should* start to see capitulation to the downside and fresh shorting. If the shorts do not kick on with it, the way is paved for a long reversal.

Statistically the fakeout followed by inside period is a 75% trade, much higher than the normal inside day. FYI certain types of inside days are minimal edge, most notably anything around the moving average zone when the averages are flat..

Lets compare it to the RETEST VARIATION SELL setup which is triggered on break of the low. I would DEFINITELY be short for this. However the RTV Sell is a slightly lower edge, percentage wise, which is compensated by its bigger percentage of outlier wins. Approximately 25% of wins from this setup are > 2R, so you need to keep this in mind and trail a stop rather than use targets.

How would I play this? If we break the daily low, get short, with a stop at the daily high.

If we break the daily high, get LONG, but prepare to get short again tomorrow if need be. If we start to go up, but FAIL TO BREAK THE OLD HIGH, then we know for sure that the bullish mojo is exhusted and the fix is in, the bears have a free kick to the head.

Trade without bias. There is a winning trade here, either way.

Scott