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How To Roll With Price At Inflection Points
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How To Roll With Price At Inflection Points

by The MoleJune 14, 2019

Earlier this week we covered how to recognize trend reversals with nothing but plain old vanilla price charts. In essence this involves establishing a sequence of higher highs and higher lows (or lower highs and lower lows during a sell off) which should remain unchallenged during the meaty part of a trend.

It is also important to keep an eye on realized volatility, especially during transitory periods preceding a threshold breach. An increase in volatility does usually suggest a weakening of the trend.

I wanted to return to the gold futures example I used in my previous post. As you may recall I pointed at the spike low breach and failure to recovery that threshold as possible evidence of a breach in the trend. Admittedly it was early in the process but at the time of observation the gold bugs looked like they were in trouble.

Of course just a day later that same threshold was re-conquered, which is why I wanted to revisit this chart and share my thoughts. First up of course no tape reading rule is chiseled in stone and if price happens to re-conquer a previously failed threshold then one is well advised to pay attention.

As a matter of fact, some of the juiciest entry opportunities occur when one thing is ‘supposed to happen’ but then for some reason doesn’t. So as soon as the 1335 treshold was breached the short scenario was losing some of its luster. Where it started to get in trouble however was the retest (second arrow) which IMO represented an excellent long opportunity in anticipation of trend continuation.

Given the gold example let’s direct our attention now to the hourly E-Mini chart as of this morning. BTW we just rolled into the September contract, so the summer doldrums are officially on the roster!

If you recall my observations regarding the weakening of a trend: In the center of the chart we have a first spike high breach on 6/4 followed by a second one later in the very same session. Not surprisingly what ensued was a massive short squeeze that advanced the S&P by nearly 150 handles.

The rally has clearly weakened over the past few sessions, beginning with the first spike low breach on 6/11, followed by two more on 6/12, probably due to the possibility of a military conflict involving Iran. At this point the general expectation was that we were looking at a more pronounced correction.

Unfortunately the contract rollover is throwing a bit of a monkey wrench into my analysis right now as I cannot be sure that the current spike higher actually has legs. Also there is the looming Fed meeting next Wednesday which involves an interest rate decision.

In situations like these I prefer to let price do the talking by establishing two thresholds, according to the motto that it’s better to be late to the party as opposed to not going and missing out on a hot morally ambivalent debutante eager to make your acquaintance.

So what I want to see here is either a breach of ES 2910 or a drop through 2870. On the short side I would probably prefer a retest after a drop below. Also I would not want to take either entry later than Monday morning and would close it down before the Fed meeting unless a respectable distance from the entry threshold has been established.

NYSE UVOL has been playing ping pong over the past few sessions and the smoothness of the signal suggests that the bots are in firm control of the direction.

However there is one chart that should give us cause for concern. Please meet me in the lair:

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I told my subs to keep an eye on soybeans the other day, and in particular I suggested to look out for a convincing looking floor pattern, which was delivered a day later. Which we received two days later – once again a double spike low breach sealed the deal on an advance higher.

I think this is another great example of how to establish entry binary entry thresholds at inflection points. And I like this example in particular due to the velocity of the price action – i.e. one is barely able to see any candle wicks while price was bouncing up and down.

Also note how quickly price rose and how long it take to descend back lower. The final give-away was the gap before the threshold breach, which again put the bears on notice. As you can see by simple interpretation of the price action we are able to collect many key observations that help us in our discretionary trading.

Once again, this is a topic I have spent considerable time covering in my Price Action Master Class Iā€™m about to release by early summer. Definitely a series to look forward to if you are a discretionary or systemic trader.


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 the usual social media waterholes.
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  • HD

    Mole, great blog today. We are going to need a chart of the “hot morally ambivalent debutante!”

  • https://evilspeculator.com Sir Mole III

    she became my wife – true story šŸ˜‰

  • Ronebadger

    Anyone have a problem with Stockcharts? I can’t get SPX to update today’s pricing

  • HD
  • http://www.captainboom.com/ captainboom

    Same story with my wife. It was very much her idea, and she’s still hot in her 50’s. Lucky me!

  • http://www.captainboom.com/ captainboom

    Early summer would be like June 21, yes? Really looking forward to this.

  • ridingwaves

    HL-Bond king Jeffrey Gundlach bets on gold
    His volatility bet on bonds 2 months ago was a 20% winner….

  • ridingwaves

    had business in Bend and Boise so I did hwy 20 out and 126 in…America is full of beauty, flying just doesn’t do it justice…… looking for property near here now…this is a hike nearby
    https://uploads.disquscdn.com/images/598e9c55b6dd3e6bddfa14d4deb9e020dce545308350571bd0da0350addb1eb0.jpg

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    Boxing? oh man, glad Julie isn’t here. She’d remind us all about her grandfather in Portland.
    šŸ˜‰

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    the less deplorables that know about it, the better.
    ticks me off to see trash in the forests.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    some of my charts are dated yesterday. @#$!@$

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    ha! full on hotflash last night. Mrs. Gerb had the ceiling fan on HIGH.

  • Ronebadger

    same here

  • ridingwaves

    I bring a bag and pack up there trash…..I then chant and hope for nature retribution against the lazy litter bugs…

  • Mark Shinnick
  • Darrell Osgood

    I’ve been stewing a bit on Mole’s recent lesson on indicators – less is more. Here is my analogy:
    Ptolemy was a 2nd century AD philosopher who championed the geocentric model of the universe – Earth was the center and since circles/spheres are the perfect geometrical shapes, all celestial objects move on these spheres. That’s not what is observed, so the planets ride on spheres that ride on other spheres. If we just keep adding spheres upon spheres, we can describe the motion of any celestial body with perfect accuracy. Your calculation was wrong? Just add another sphere. Add another indicator. Add another chart. It works with political discussions, too.
    In the 14th century, the Mole, I mean the English friar Occam called BS. “Occam’s razor” called for simplicity along the lines of “the simplest explanation that satisfies observations is more likely the right one”. The razor is now a foundational principal of modern science.
    Einstein said we should explain things as simply as possible and no simpler.
    (On a side note, there is a philosophical war among scientists about whether we are looking for truth or we are looking for a model that fits the observations. I side with the former because of the Ptolemy trap. Now there is a third group which does not care about accuracy as long as they get fame and money.)

  • http://www.captainboom.com/ captainboom

    That still happens occasionally at my house. She’s on the downhill side of those.

  • http://www.captainboom.com/ captainboom

    I don’t need fame. Just money šŸ™‚

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    just don’t mention Gillette Razor. I’ll be triggered.

  • BobbyLow

    Slice and dice continuaton today. /YM Points – From 9:30 AM to 9:35 AM (5 Minutes) = 84 Points down. From 9:35 AM to 10:50 AM (55 Minutes) retracenent of 91 Points back up. From 10:50 AM to 11:15 AM (25 Minutes) 85 Points back down.

    Fishing sucks today with what one might call a shitty Fckin tape.

  • zzezzezz

    been successfully scalping /ZC for the last 48 hours.
    now i’m short a small nibble on /ES.
    will load up more if/when a breach below support that Chief mentioned in his post.
    stop is set loosely above today’s high.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    2 weeks of massive 30-40 points moves per day, and then silence.
    It’s that monkey dopamine mind that wants the old exciting weeks.
    5-10 pts per day?, Crikey!!

    Can’t have it always that way.
    https://uploads.disquscdn.com/images/8a4decfa06bed1ef05e0e1f4864b98480d43c820cf01c21ac70ac52b10bd3fab.png

  • https://evilspeculator.com Sir Mole III

    Scalping corn futures? You’ve got some cojones!

  • BobbyLow

    Funny how we can agree on a lot of things but some not so much. šŸ™‚

    I came extremely close to getting into a fist fight a few years ago when I saw this old MF throwing his trash from his parked car onto the street. After confronting him, I must have had enough of a crazed look in my eyes because he pleaded with me to back away while he picked his trash up and put it back in his car.

    Whenever I see people/pigs/lowlifes throw trash out on the street, on the beach or wherever they please it drives me nuts.

  • https://evilspeculator.com Sir Mole III

    You are right, they should call it Mole’s razor! šŸ™‚

  • https://evilspeculator.com Sir Mole III

    It’s the one that cuts off your balls.

  • https://evilspeculator.com Sir Mole III

    Looks a lot like Slovenia – similar climate as well.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • https://evilspeculator.com Sir Mole III

    So here I am at the White Mountains in CA up about 14,000 feet where you find those 5000 year old bristlecone pines. Guess what – some family shows up and the spoiled brats start climbing one of them, dangling on one of the branches while the mother takes pictures. I practically exploded and by the time I was done yelling at them they retreated to their car and left šŸ˜‰

  • zzezzezz

    yeah, scary stuff. price is ramping up quickly, might be headed towards 500.
    i’m staying away from it for now.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    who knew that corn flakes would become the next BitCoin?
    šŸ˜‰

  • zzezzezz

    check out the MONTHLY chart! 800’s
    https://finviz.com/futures_charts.ashx?t=ZC&p=m1

  • ridingwaves

    running into first big resistance on monthly candle from May 2014, RSI at 68 on same chart…still has some room north if it gets thru here….

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    look left. if 500 is surpassed, 1000 or higher baby.
    edit use a trend line of highs.

    “Momma & her kids gotta eat”

  • ridingwaves

    excellent….Good to see both you and BL doing natures work on trashy folks…I have not been silent myself, though blood appeared in one un-mutual understanding about trash…

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    someone please tell me why the CORN ETF is robbery.

    beats silver, and I’m ready to campaign all over this thing.
    https://stockcharts.com/h-sc/ui?s=CORN&p=D&yr=1&mn=4&dy=0&id=p56819441172

  • zzezzezz

    I dislike ETFs that have that kind of “decay” built in. Better off with options! (not really)

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    15 to 30. I’m not asking MUCH.
    šŸ˜‰

  • ridingwaves
  • zzezzezz
  • ridingwaves

    strawberry wilderness, John Day valley….I’m ready to move, the wife not so much

  • BKXtoZERO

    Wow that looks Great! I am loading up :/

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    “The BEST a eunuch could get”

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    my 401K provider won’t let me.
    LOL.

  • BKXtoZERO

    They are smart.

  • Darkthirty

    ZC is a great buy, fundamentally. And i’d assume that unlike PMs or indexes that are static, a solvent consumable will actually be proven. If all PM paper contracts were converted this month, would it be possible to manipulate the price? Seriously?

  • Darkthirty

    Ethanol mandates

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Today is totally fun fun fun here. I have found a new place to live with reasonable rents. called the Vineyards. Filling out application today, tomorrow ? Will turn in next week with my leasing fees to rent. Yay, I will get to keep most of my own income now. Glad to see so much discussion with happiness from everyone. Big Hugs.

  • Darkthirty

    Here’s one for you corn-fed peckerwoods.. (CF) CF industries, anhydrous producers

  • Darkthirty

    Zoom in on the minute charts

  • https://evilspeculator.com Sir Mole III

    Yes you’re better off with options. Buy some December OTM calls and thank me later.

  • Darkthirty

    Don’t they put coupons on soy milk cartons?

  • Darkthirty

    Summer’s ass! 50s all day yesterday with lake effect rain….

  • ridingwaves

    would seem to make sense to scare market down for couple days before fed decision. spx is 70 points off ath and chande is overbought…

  • BKXtoZERO

    I was thinking same….. hard to beg for a rate cut near all time highs. I am guessing they will be disappointed.

  • ridingwaves

    if the fed lowers rates next week they lose all credibility…their mandate is met….UE is below 4%…it would be nuts…and the $-GC move taking place seems to be catching wind of no change

  • BobbyLow

    I’m looking at it now.

  • BKXtoZERO

    well they would lose the last sliver of remaining faith

  • Darkthirty

    If your system can pick off up or down moves with 90% reliability, the weekly options are cheap and profitable. ATM ES is $150 per right now, 5 pt move is 2X. They expire at regular market close….

  • Cyd

    Lunch time SLV pulling back and closed long a short time ago below 5 ema WFC a lower low but an intraday reversal Tech wreck – under performance banks and a global bond rally and SPX a consolidation and flag. Bifurcated market and this market has more issues than Time Magazine and SPX forming a flag.Very nonsensical
    Cyd

  • Darkthirty
  • Darkthirty

    Would lose?

  • Cyd

    $VIX with bollinger bands being held by 20 sma. Pops above and selling will increase
    Cyd

  • Cyd

    How many think SPX will breakout of consolidation to upside with bonds rallying ? Better watch SPX close. Have a nice weekend
    Cyd

  • Cyd

    10 year yield testing September 2017 low Breaks below and ugly will be the new word of the day
    Cyd

  • BobbyLow

    I won’t be trading any options but thanks for prompting me into looking into trading futures using a 1 minute when we get fast rolly polly hills and valleys like we might have all summer. There’s still a lot of points to be captured but I have to figure out how to catch them faster on a consistent basis.

  • Scott_CA

    I find the July-ish upticks intriguing–every year can’t be an accident. Only thing I can think of is that’s about the time things settle down for the summer on the farm. In the spring, too busy to deal with moving corn, but it has to move off the farm before fall to make room for the next crop. Maybe too late for this year. In the future, tariffs may mess with this.

  • HD

    Rest up. Next week is gonna be a spicy meat a balla!

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    Full moon. Tuesday Turnaround Taco Tuesday.

  • Cyd

    SPX no buying or selling Yes waiting on Fed Bifurcated market DOW and SPX no change with NAZ and small caps down BKX intraday reversal holding 5 ema WFC very strong resistance @ 45.67
    Cyd

  • ridingwaves

    good weekend reading on something dear to Moles trading den…..recordkeeping….evaluation..
    https://www.dashofinsight.com/stock-exchange-do-you-evaluate-your-trading-mistakes/

  • http://gerb-reloaded.blogspot.com gold_gerb

    for those who mock crypto. Think about the next Generation.
    https://www.youtube.com/watch?v=V3VgbQ23E8k

  • Cyd

    Happy Father’s Day to all Dads
    Cyd

  • http://iberianviews.blogspot.com/ catracho
  • Cyd

    The banking index BKX is at an inflection point.It’s 55 ema – 50% retracement and 99 resistance zone above. If it clears 99 the IH&S pattern targets 103 the May high. The confirmation will be the 5 ema crossing above the 55 ema along with the MACD going above it’s center line.The intraday reversal Friday was not to my liking Watching this closely as have a short WFC. If wrong won’t be wrong long BKX at 103 will be a trading range

    Cyd https://uploads.disquscdn.com/images/b0a16b5700fe21f4e59b4d9deda4d6ac2d437e80baba1283464695f939a99e30.png

  • Cyd
  • Cyd