Price Pattern a la carte

Fujisan here.

This rally has been relentlessly climbing up every day and I am just so happy that I am staying out of this.

John Person

I have discussed my pivot trading strategies previously where I was using John Person’s pivot point trading triggers.  If you have not had a chance to read his book “Candlestick and Pivot Point Trading triggers”, I highly recommend it.

I was flipping through his book today and I came across a very good chapter where he discusses how to determine the market condition.

” I would say the hardest thing for any trader to do is to buy high, especially after seeing a huge run in the market.  Buying high is a technique that very successful professional traders use.  It is also a contrarian approach.  After all, if you feel that the value cannot go any higher, it probably won’t, right?  This market condition generally tempts traders to sell.  That is absolutely the wrong thinking!  That thinking falls under the category of “picking tops without cause,” “justification,” and “trading based off a set of rules or technical reasons”!  Do not try to anticipate what the market will do next.  Simply go with what the market tells you it is currently doing.  In other words, try to avoid concerning yourself with why the market is moving; focus on what is occurring.  That is my definition of staying in the now and, most important, staying with the trend.

Forget that last week the market may have taken a nosedive or that yesterday the market rallied significantly.  Concern yourself with what the market is doing now.  Ask yourself where prices are in relation to the current trend.  It is up to you to identify the type of trader you are and the time frame in which you trade.”

Three Drives Pattern

Here I am officially declaring the death of H&S pattern that I discussed last week.  I hope DavidDK forgives me for using this infamous word just one last time.  Of course as a pattern trader, I can convert this into something else that works. 

This is what I posted back in May 6th when SPX was going through a = c pattern.  Remember those days?

Now, please take a look at SPX chart now.  It seems to me that SPX is now developing a three drives pattern which is a = c = e.  What is amazing in this chart is not only the price distance in each drive equals (or so it seems) but also the chart angles of a and e are the same. 

Dragon Teeth Pattern

I didn’t come up with this pattern but Forkoholic pointed this out last week and I shamelessly decided to borrow his idea.  Alpha also pointed out the similar price pattern – expanding triangle.  Doesn’t it look like a perfect fibonacci beauty? – well almost.  The pressure point misses 3 days from the true bottom.

1938 Crash Pattern

Ever since someone pointed out 3 months ago that 2008 crash mirrors 1938 crash, I was following 1938 chart very closely and using it as my roadmap. 

What is characteristic about this recovery rally was that there were literally no pullbacks and just went straight up to the top.  It was merely forming a bull flag before the final push to the upside.  This is the reason why I did not short this market.   Don’t stand in front of the running train or you will get hurt.  This goes back to John Person’s discussion of “staying in the now and staying with the trend.” 

Eifel Tower Price Pattern

VIX weekly is right at 200 SMA support level and the bears need to defend it well.

USD/JPY

I know Mole now is hooked on forex and I know exactly how he feels – it’s much easier to spot a good entry point.

As you can see below, if you combine Moles BB together with trending channel and pivot points, it’s almost perfect to pick a very good entry point.  The only challenge is that you may not be around to execute the trade.   

The beauty of using pivot point is that, even if you miss a perfect entry point, you can still make an entry on the next pivot point with a very limited risk  For instance, there was a perffect entry point on Monday at 91.73, but that was 2:00 am (PST) and you may be sound sleep (yes, we all need a beauty sleep).  So, what we can do in this scenario is to wait until it closes above the pink pivot and then make an entry.  This way, you could set up a stop right below the pink pivot (risking only 10 pips) and ride the possible upside of more than 100 pips (great risk/reward).

I hope Mole is having a wonderful time in SD.

Have a good weekend, everyone.

Fujisan

Saturday Update 1:00 pm (PST):  I forgot to include the USD/JPY Daily chart.

Here is the USD/CAD daily chart.  Very nice trending pair.