WHEN BOTS BREAK & REVERSE

The BOTs were set early this morning as the Euro Zone market was ending and pre-open for the US market.  The options to consider:

• It will act as support or resistance, forcing price back into the zone.
• It will break or fail.  Look for a trend if there is a break. If it fails, price reversing through a BOT is an aggressive entry contra to the BOT, but in the direction of the reversal.
• Reversals, after price has moved away from the BOT, are considered strong plays.

TODAY:  ES & 6E

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The ES broke the 1335 key level last evening, but had a "light" test of that level as support.  Most areas of significance will see a re-test to confirm the level, then resume the dominant direction.

This A.M. price consolidated just below the long BOT, then ran through the short.  Generally, the first test is a failure (today pre-open and b3-4) and we avoid, or take expecting a failure.  The second attempt  is better and we see it was successful  b6-12.

1335 was a key support, and the next play was simply a play on that support.  Hindsight, it was a valid judgement, and a larger stop could have been used to run an order until the end of the day.

The bullish TL is a preferred play as is the reversal back through the short BOT.

The 6E saw the short BOT fail early in pre-open, consolidate, and reverse the short BOT for long considerations at the EMA+.

The short BOT failed again, and the EMA served as a resistance level for the first half of the day.

As with the ES, the expected move was to run higher after mid day, reaching the A.M. zone.

BOTS & TRENDS

The BOTs give us three pieces of information:  the long, the short, and a trading range.  As we gather more information, the BOTS may give a glimpse of where the market is likely to trade.  A break of a BOT is expected to develop into a trend, however a failure offers aggressive traders a chance to enter contra trades, i.e. a short at the long BOT if it fails, or price reverses.


TODAY:  6E & ES

The 6E broke long on our early A.M. setups, and the failure was a valid short to the middle of the range.  B14 was establishing a higher low from approximately 7 AM,  and at the middle of the range.  Aggressive long entered, then added at the EMA+ and long BOT area.  The EMA acted as support after the second break long.

The ES moved in a similar fashion, going long and reversing to the middle of the BOT range.  Bears entered to spoil the bull run  and pushed price down to 1327.  Aggressive bulls entered, and added at the EMA+  and long BOT, which is the conservative entry areas.

The mid day focus was upon the bearish channel retrace.  Bears continued to enter at the upper TL, as each bull attempt fell short and only allowed approximately  1/2 point runs.  The bulls appeared to give a little payback to the bears, as they stopped the bear trend at 1327.

When the day finished, we were basically in the middle of the two extreme pushes by buyers and sellers.

GOT BOTS? NOW WHAT?

If you have read any of the recent blog post, you are familiar with BOTS.  Normally, there is a long position and a short, and additional BOT ranges can develop intraday.  Today, extended range bars required a middle BOT.   We have the BOTs, now what?  what does the chart tell us about trading?


TODAY:  6E & ES

The day started with the long/short  BOTs set, and a middle target was added.  The extreme move in b5 should have suggested a short.  Even without the BOTs, you have a cross of the EMA  with a negative close-one below the EMA.  The ideal hold would be run with the trend until the EMA is challenged.

By 11-11:30 we see another BOT range.  Trade the long BOT, which also corresponds to the first bar to close EMA+.  The 12:45-1:15 consolidation is a valid exit.  Price breaks the EMA but fails above the long BOT, a bullish signal.

The ES had an extended pre-open bar, necessitating a middle BOT.  By b4-5 we can identify a bear TL.  Shorts will occur at/near this TL while longs will wait for a failure of the short BOT, which was near 1214.

A double bottom hits b20 at the 12.5 level, and begins a bullish channel.  Your options at this point:

• enter again at the 1214 level.  You have a know loss potential back to 12.5.
• enter the short BOT + (at or just above the BOT)
• enter at an EMA+ value
• enter a break of the bear TL
• enter the middle BOT
• enter the long BOT

At b20 you do not know if price will hit any of these targets.  But they are targets which should be of interest, and they are targets that should increase your confidence in the trade as each occurs. Each increasing the support level, and makes the bull (bear if it were declining) stronger.

SOME OF THE MISSING PIECES

TODAY:  ES & 6E

Brief chart discussion this evening, so a trading rules section can be developed.  This is part of the missing pieces, as  the blog continues to develop the trading fundamentals.

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The early, pre-open BOTS were determined and posted in various chat room, including our own.  Just prior to the open, price failed at the EMA (a MAXT).  The short was acceptable:  MAXT, lower short BOT.  By bar1, the short had failed (FBO) and the longs ran to the upper range target.  We see a bullish TL develop, and new longs were entered at b10-11.  By mid day, a new range developed.  The second test of the short BOT was a reasonable short:  at BOT, below the EMA, second challenge.  It worked out as a scratch. As stated in the rooms, one failed, one (next) sailed!

Out for the day, but the reversal back to the long BOT ( and EMA by the way) was a sound decision to short.

Same story.  Set the BOT range and wait.  The double bottom  just below the short BOT was noted.  Both ES and 6E were long bias today.  Not drawn, but you should visually see the bull TL from the double low.


SOME RULES:

1. The BOT's establish a trading range, and will direct our attention toward the market direction for the day.
2. The long/short BOT is the entry.  Price structure before, or  a BOT located near/at the EMA will give more confident to the trade.  As a trade, consider each aggressive on the first attempt.
3. When price exceeds a BOT and reverses, it can be labeled as a FBO. (failed break out).
4. Price from a FBO should be watched for a new trade contra to the BOT when it reverses through the BOT.
5. When in a trade:  stops will generally be 5t.  If the entry is at/near the EMA, consider a 5t failure from the EMA.  Example:  When the short did not run today at 1317, price moved to  where bulls were waiting to enter.  Generally, not good for the short.  However, we were near the EMA, and a 5t failure for early bulls was expected.  It happened, and allowed for an exit to the trade without damage.
6. When in a trade: profit will be +1 partial, and breakeven.  If one contract (C), then the target is +2, with a stop moved to +1.  For all cases,  one purpose for the BOT's: we assume a trend will develop after the break.   Once price is +2 from your entry,  consider adjusting your stop into profit and follow the TL.  Generally, this is approximately 50% of  a control bar, or 1-2 bars behind the price.  A control bar is one of significance.  The 9:10 AM  6E bar or b13 at 10:30 would be examples.  The 6E targets are +5 or +10, then follow the trend.

READING THE MARKET (PRO'S)

Tonight, the points have been removed to move the focus toward the chart.  Your objective is to learn where, when, and the how of trading.  Posting of points, or other similar enticements, by any website, blog, etc. somewhat takes you away from the objective:  the material taught, not the teacher.

There will always be detrators distracting. After all, if they were so great they would post their trades out in the open, or at least provide constructive discussion about trades. There is nothing wrong about not sharing your trades. But far too often it seems their only purpose is to rant about others.  Again,  trying to divert your attention.  They eventually blow away like the last leaves of fall.

You always have a choice.  As a trader, or trader in development, you are looking for what works for you.  No one plan nor a particular book ,nor a seminar will be the sole answer.


TODAY: ES & 6E

The day began with the setting of the long and short BOT's.  The failure of a BOT will often provide a reason to enter a contra (to the BOT) trade.  There was a pre-open long at the short BOT, followed by a shorting of the long BOT  at b12.  The market tested the EMA and failed creating a short opportunity.  The channel was identified, as well as a micro BOT  at mid day.  As mentioned in the chat room and the live presentation, the bias at this point was bullish.  The issue?  we did not know when the bull would break and run.  Entering some longs, even at one to two ticks or breakeven,  gave us a chance to be in the game at the break.  Also, markets will have tight move days and the effort today will pay then.  You need to develop trades for trends, breaks, and tight ranges, or choose to sit it out.  The long was at the lower end of the micro BOT, with a target of reaching the lower A.M. BOT.  That target was hit, and provided a nice long.

A warning was issued to key a watch on 1317.  We were bullish, and caught the run. When the market in general catches on with longs entering in euphoria, we must be mindful of the unexpected.  That would be the failure at 1317.  But what if that was the intent of the market, or those that move the market?  The in reality, it would not be the "unexpected".  We were ready, and took a nice short to end the day.

All of this is being explained  in our chat (or live presentation).  Traders are beginning to more accepting to the market reads, and are benefiting.  As to  you accepting it or not really does not matter. Professionals are at work, and will move the market.  Your only question should be:  do I move with them, or wait until they are done and possible be the target of their market exits?

Again, you have a choice.

we were long bias in the 6E as well, and took numerous opportunities at the bullish TL and the lower BOT.  The anticipated long break in the afternoon developed nicely for traders in our chat, and the target was hit.

5/23/2011 EVENING TRADING

The blog is prepared in the evening after the close, and the current action in the market is being viewed as well.  Trades are trades.  If they are there, take them.

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The ES had a narrow, 1 point  BOT range.  Once it broke long, a target was set at 1317.  The short was taken when the target was showing weakness, and a final trade was taken at the EMA.

The 6E had a wider BOT range, but the EMA long was a valid trade.

EVENING SELLS, DAY GOES LONG

The trade day actually started last evening.  Long and short BOTS for the 6E and ES were established.  The ES opened with a slight gap that quickly filled.  The long was set at 1326.50 ad the short at 1323.  By the time the US market opened, the ES had sold off to 1314.5.

The 6E also had a gap down open that never filled.  The long bot was established at 4120 and the short at 4090.  The short was tested, and we consider the long a failed break out (FBO).  One of the rules we are developing, a test of one bot followed by a failure of the other, will result in a break out run of the first bot tested.  Last evening, that fantastic BO was to the short side.  By the US open, the 6e had shed 100 ticks.

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Last evening, we started a simple screen share and discussed the market.  The format for the webinar is being developed.  It has to be right, and provide the teaching desired.


TODAY:  6E

Just prior to the US open, the long/short BOTS were established.  Without too much detail (beyond the intent of this blog), the BOTS are key points in the market and represent where a price crossing or rejection is important.  As seen in the BOT's  for last evening,they are very important.

Our bias was long from the start of the day.  The first long trade ran for some 20 ticks, and additional trades followed.  B10 area was a MAXT:  at the long BOT, at the EMA; screaming LONG.  Next we had a bullish TL and a target price of 4045.  Longs entered (and continued to enter) at the EMA willing to accept the risk of a reversal.  But we knew what the professionals knew- the run and bias was LONG.  They were not looking for a reversal.  Shorts were, no pun intended, in a short time or paid dearly.


TODAY:  ES

The ES was more problematic today until it too decided to follow our long bias.  The first twenty bars were inside the BOT range, with some FBO's on the short side.  It was interesting to see some of the postings where all the doom and gloom people were looking for 1300.  That was not the nature of today's market.  It was long bias early.  The question was when it would prove us right.

The screen share was a simple format, but long enough for attendees to see some trade setups.

FAILING OR BREAKING: BOT'S TELL A STORY

Whether the BOT's are failing or breaking, they will tell a story about the market.  If price breaks the BOT (break out target)  the play is to use a long/short and expect a trend to develop.  Stops (according to your risk plan) are used to prevent extended losses from a failed break out (FBO).  Once in profit, and according to your target, profit is taken and a runner order is allowed to follow the trend to maximize profit.  Whether you only use one contract (C), or multiple C's, the stop will follow to capture the TL profit.  No one can pick tops nor bottoms in a trend.  Maybe you get 2-3 points one trade, 6-8+ in another.   Take what you get.  There will always be another trade.

BOTS:

Break out targets for the long and short are developed prior to the market open.  In our blog, those have been for the US open for both the ES (S&P500 futures) and the 6E (Euro-dollar futures), however we are experimenting with other indices and market opens.

A breaking BOT trade is explained above.  But the bot can fail, or we can have a FBO.  A failed BOT is where price can consolidated just below.  It will eventually break or it will reverse.  Look for both trades when the BOT fails.  With a FBO, it is reasonable  that a trade hits, although there are reasons not to take the break and we will discuss those in a later blog.  On a FBO aggressive traders place contra trades expecting a market reversal.


DISCLAIMER:  This was another short trade day.  Three students took first place in a stock contest sponsored by the Economic Council, and their award luncheon was today.  Any trade or potential trade discussion after 9:30 AM EST are hypothetical, however they are believed to be representative of potential trades based upon our settings, criteria, and trade discussions presented in prior blogs.


TODAY:  6E

The Euro 6E was selling about an hour after the Euro Zone market opened.  Knowing it was a short trading day, we opened chat rooms early and provided the BOT's for the 6E and the ES.  The 6E short BOT provided the first trade, with a +10 and the runner being stopped at +10 as well.  The price action reversed and was consolidating at the EMA.  An aggressive long BOT was added.  This would allow for additional profit should price continue bullish.  But notice around b273 (9:05).  We have a bear "resistor" bar,( coined for it's appearance-looks like an electronic resistor) followed by a bullish failure at the A-BOT.  These candles, and wicks on the prior two, are suggesting we have resistance at the A-BOT.  That's what the market eventually discovered; we knew it earlier when the aggressive BOT was added. If a long BOT fails, traders are looking for contra short, which the market eventually confirms.

Even if you did not short the A-BOT, the EMA was resistance and price broke the short BOT at the open.  The TL that followed would potentially yield another+10 and a stop exit near 4170.

The next potential was the bullish channel.  Longs would be looking for HL at/near the TL . As for shorting,  personal preference would be to wait for the short BOT, and we see a failure for the BOT around b50-51.  Hint: notice another resistor bar just below the bot at b50.  This would be a short with confidence.  We have a short BOT, and an upper TL to the channel failure. Again, more conservative shorts took the EMA failure.  This created a potential TL short with an exit in the 4150-4155 area.


TODAY:  ES

The ES and the 6E appear in sync now.  Being in near sync or being opposite in direction is importance to know.  The ES was selling in the Euro Zone market, and we noted a bear control bar when we opened post in the chat rooms.  Essential, control bars are extended in range, will have price consolidate at either extreme, and price over the next 4-8 bars (average, an be longer) will trade inside the control range.  Today, the long BOT coincided with the top extreme of the control bar.

Price continued to sell moving to our short BOT, which we know is considered support.  thus part of the importance of a break.  The long BOT is viewed as resistance.  The short BOT and the long BOT fails, as price consolidated near the control bar range.  By the open, the long BOT and the control bar have contained the bull.  The EMA is your short, if you missed the FBO of the long BOT.

1335 is an important level.  A break is significant.  Bears win until we find buyers  near 1329.  A long would be acceptable at the HL on the TL at b33.  Exit of all or part would be at the short BOT.

Next?  Price runs to the BOT range, and again fails to break long.  Shorts could enter at the FBO and most likely would exit all or part at the EMA.  The high probability short is at the EMA failure, the MAXT just below the short BOT.

TRADING THE BREAK OUT TARGETS

Today was going to be a great day.  Not disappointed with the early trading, just a little miffed I had a power issue and missed  most of the day.  My apology to the chat gang.

 The breakout targets (BOT) worked.  As discussed previously, we are trying to run the trend that develops after the break.  The 6e works very well, and the ES has potential, just be aware that it will tend to test the targets before breaking through.  Another valuable point, a failure at a target should be viewed as an opportunity to enter the opposite position.  A perfect example was the ES long BOT failure which provided a short opportunity.  Stops (according to your risk) are used to provide BOT protection should it be a trap play, where price fails briefly, reverses, and continue the break of the target.

A brief disclaimer: With the loss of power, all discussion of potential trades after 11 A.M. EST. are hypothetical but based upon what is a best guess of how the trades would be made given our targets and trading requirements.


TODAY:  6E

6E had been selling since 8:15 AM EST, when we started the day prior to the US open.  The long and short BOT's were set. Then, RATS!  My power cord was in the other office.  Well, two hours are better than none.

Price headed for the short and bounced, showing support.  The bullish TL warranted an aggressive entry at the EMA+ just below the long BOT.  We discuss this in our chat rooms, and provided updated on adjusting the stop to run with the trend.

***

Price retraced but notice it found support at the rising TL and the long BOT.  A flag-like pattern from b8 and the BOT/TL support is screaming long.  At a minimum, you should see a long at the EMA+ and the long BOT at b32 (12:05)  1.4250.  The TL runners would exit around 50% of b 37, approximately 1.4295-1.4300.


TODAY:  ES

ES had a bull control bar at 5:50 AM EST.  With a control bar, price is expected to trade inside that micro range an average of 4-8 bars prior to a break.  The long and short BOT's were put in.

As we got close to the US open, price was staying +/- inside the control bar, and was consolidating just below the long BOT.  The wicks and tails were telling a story:  market indecision. (the consolidating).  The first true test of the BOT was b6, a "resistor"bar.  This failure was a valid short.

A short was available at the EMA failure on b8, however it was the short BOT that we entered.

***

A short was possible at the consolidating failure under the EMA-  roughly b10-14, with an entry 1t below the middle bear, b13.

A bullish TL develops; aggressive longs trade at the TL, with a conservative entry at the EMA+ on b32 running back into the long BOT channel.  A key short would be at b57-58 where we have a break of the long BOT-, EMA-, and the lower channel.  The followup HL was an acceptable long.

RUN THE TREND AFTER THE BREAK OUT

Break Out Targets continue to be a valuable tool  for flushing out trades.  Today was an example of the value of playing trends after the BOT hits.


TODAY:  6E

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We started the day before the US open.  The Euro had spent most of the Euro Zone trading market in a decline.  Long and short BOT's were set at 1.4211/12 and 1.4192 respectively, and the plan today was to start with breakeven and run, i.e. try to let the orders run the trend.  Members were using longer holds, and we alluded to that yesterday.

The short BOT hit first, and allowed to run.  Albeit, not very far.  The EMA failure (MAXT) was there, but was skipped.  On  the next short, we took some off .  The next two trades discussed were at the long BOT.  The first back to resistance (4225) just prior to our BOT's, and the next after the BOT+, the bullish TL, and the EMA+ were seen as support.  A stop was set below the current price, and our target was added.

B25 was a bull control bar.  Price consolidated just above, and moved back inside that control bar.  When price had engulfed b25,  a short (be/run) was in profit, but settled at BE.  A second order was entered, but closed early due to an interruption.  Not sure of the rule number, but it's "don't trade when your focus is diverted".

The next setup is very interesting.  There are three plausible entries for longs and three for shorts.

LONGS:       1- failed BO of lower TL       2- BO of EMA+         3-  BO of upper TL.


SHORTS:   3- BO of upper TL               2- BO  of EMA-         1- BO of lower TL

We took the latter.  Day done....



TODAY:  ES

ES sold off in the Euro Zone trading session, and looks confusingly similar to the 6E.  Again, we started before the US open and established the BOT's at 1327 and 1324.5.  The long hit for a profit.  When the market opened, the rth charters saw a large sell off bar.  We saw a short BOT failure, and began looking for long trades.  The bullish TL was clear by b8, we just saw it sooner.

The next focus point was the ascending triangle near the important 1335 level.

These tend to break with trend, being a continuation pattern.

We are now in the 1335-1350 trading zone.  Important for bulls.

Join us soon for live discussions and trading.

TRADING ELEMENTS

Elements is a term I coined for all the items added to a chart that "tell a story."  The story is how we plan to trade the market  to maximize the trade return, and also to seek trades that have a high probability of being successful.  Being able to read the market brings about positive trades.  Positive, and more positive.  For many of you, following this blog has confirm this in your own trading.  For you, plans are being developed for the live presentation.

Elements in the charts will include the candles, but it goes beyond just the candle patterns.  It includes the EMA, trend lines, channels, and the buy and sell breakout points.  We need to know if  they are positive or negative, and is price breaking one or more of the elements.  The more elements involved, the higher out expectation that the trade will be successful.

TODAY 6E:

One word:  WOW.  Some of these are super runs of 50+ before they "violate" the story.

THE STORY:

Points 1 and 2 are the early A.M. long and short breakout targets.  We have a declining TL and EMA.  The 7:35 bar fails at the TL and the EMA, and crosses the BOS for the short.  Our exits are 5-20 points.  But from a strictly story approach, your exit would not occur until the TL (aggressive) or the EMA (conservative) is breached.

Bulls run back to the #2 level and fail, setting up another shorting event.  We will look for longs breaking above 2, and shorts below it.  Earlier, had price rose to #1 and failed, we would be looking for a short.  A BO is the long or short.  A failure is the opposite side trade at the target.

The double bottom was a long signal for many, and certainly once #2 broke.  Visually, you should see a rising TL just above the EMA, from the DB to #2.  By the story, hold the long until the break of the TL or EMA, or if Target #1 fails.


TODAY:  ES

You need a double take when looking at the ES and 6E.  Both had an early A.M. break of the sell target (#2), a declining TL (#3) and EMA.    Es even had a bull run back to #2 that failed.   For the 6E and the ES, shorts were entered at the first break of the BOS #2, and at the second hit that failed.

The BO targets were established early today for the 6E and ES, and both were used to generate successful shorts.  Per the story, the ultimate hold would be until the TL or the EMA is threatened.

#4 was a mid trend failure at the 25.50 area, and is important to a later trade discussion.  #6 is the next bullish channel.  A channel  can be a short at the top, and long at the bottom.  I prefer the bottom entry for the bull channel, and the top for a bear channel.

#7 was a W push.  We had two pushes, and the feeling was we would have a third going into the 25-26 area.  this is where #4 came into play.  Price pushed into the same area as the mid trend failure.

The failed channel BO at b63, combined with the b64 engulf, allowed longs to enter.

A WALK THROUGH THE CHARTS

Tonight, there are no trades posted.  We will take a walk through the charts and discuss what "it is saying,"or what it should have said to you today.  Don't worry if you took the trades or not.  Practice, and put yourself in the hunt when the next trade arrives...



TODAY:  ES

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If you will open the trade day using the global chart, an entirely different story unfolds.  If you prefer the rth, at least look at the global for a quick read.

We have a bullish bias from 7:20 A.M., with the TL from b160 to b179-180.  When the US Market opens, b1-2 are a reversal ( a reversal takes out all or nearly all of prior move whereas a PB is a shallow reversal) of the consolidation at b177-180.  B1-2 are part of the rejection of our A.M. BO long target (BOT), but failed  above the BO Short target (BOS).  The bullish PB on b1 above the TL is a buy signal, with a stop at or just below the consolidation zone.  Even b2 was a buy (2nd attempt) above the BOT.

B3-4 is a PB on the global, and a first reversal for a rth chart.  Price holds at the EMA, and when b5 holds at the inside TL, it is a long  and certainly a long at the BOT.  Where I take a trade and where you enter may never be the same.  But you should be moving in the direction of taking similar bar setups and breaks at the L/S  targets.

B6 holds at the inside TL and is very bullish.  Again, a long above the BOT as a minimum.  That took you into the important 1335 zone.  We were looking for the mid 40's, so 1341 area was close.  The market has trades 1370-1350, 1350-1335, and 1335-1325.  Expiration is next week, and May can be very volatile.

By b27 the downward channel was clear, and the EMA failure at b28 was a safe short.  The next short was the EMA failure (MAXT) at b38-39.  WHY?  top of channel, EMA-, 1335 failed, then the BOT.  As an element fails, or we have multiple failures, you need to look for the trade.  B56-57 was a MAXT of 1335 and a failed channel BO (FCBO).  Why is b68-69 a short?  How about 1t below b63?  B75, b78?

Find the negatives in the market- failed TL, EMA-, BOS, a bear channel, a heavy wick candle.  Find the positive in the market- TL, BOT, bull channel, EMA +, a bold tail candle.  Once the market talks to you, find the candle for your entry.  Build your case, build your confidence.



TODAY:  6E

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The Euro-Dollar pair (6E) was in a bullish mode from 7:15 A.M. EST.  A PB to the EMA support occurred just prior to 9:00 A.M.  Bars 180-181 began an inside (inside the EMA  or between price and the EMA) bullish TL. If you missed 180-181, then each PB bar(s) above or to the TL is the buy opportunity.  Repeat until the TL is broken.  Use the TL in a case like this, as the EMA is too far away once price breaks bullish at 180-81. 

When price does return to the EMA, it is a bearish channel.  6E BO's tend to be more reliable than the ES, and a long is justified at the EMA hold ( a positive) b25-36, and they are a channel BO (another positive- building the case).  B39 is a bull failure (look at b20).  We now have a new TL, that hits at the lower high b56-57.  All shorts for a reason: b20, 39, and 57 (b58 was the entry for most).

FRI 5/13/2011

We should be back on schedule now. The blogger service was down Friday, and it was a half day of trading by choice.



TODAY 6E:


The 6E was in a down channel for the Euro Zone hours, with a small, 2 bar rally spike around 8:30 EST.  The downward pressure (#1) continued,and was very clear on the global chart.  The global is preferred over the rth at the open of a trading zone.

There was a double element failure at b10-11 (the EMA and upper channel #2) that was a long term short hold.  Elements are any items added to your chart to provide a better understanding of what the market is attempting to do.   It was a long term hold since the follow up challenge at b15 fail too.

The BO of the lower channel (#3) was successful, leading into the Midday lows.  Exits for the hold would be at 50% of the BO run or at the lower channel touch, which was approximately the same levels today.

The bullish PB was playable, but came after we were done for the day.

TODAY:  ES

The Es was trendless coming into the 8:00 to 8:30 A.M. EST.  BO Targets were established at 52.5 and 47.75, and we still had the important 1350 support.  The 1350 broke first, and we had price consolidating just about the BO.  B278 breaks, and is the key to the "short trading"day.

B1 challenged three elements:  the BO target, the EMA, and the bear TL.  Again, clear on global view, not so clear if that's your first rth bar look.  For rth, b3 was the first reversal, and b6 failure of the EMA and TL is a short opportunity.

The first trade on the ES side was the second reversal at b9.  Price stalled just under the lower target near b14.  We have three element converging: the EMA, the lower BO target, and the TL.  The more elements involved, the higher our expectation that a trade setup will be successful.

End of the week, time for some R & R.

BACK TO BASICS

Yeah, blog is back.  Due to issues with blogger, we were unable to post Thursday's review.  Here it is...


TODAY:

Yesterday was a trend day, yet the majority of trades were counter trend.  Nothing wrong with CT, as it is a trade.  But the trend was a trade too.

Today we went back to basics.  Look for, and possible trade the element breakouts (BO).  Elements are any item you add to a chart to help provide an edge, or some clue as to what the market is attempting to do..  This can include channels, TL's, MA's, BO Targets, etc.  Some traders will use a calculated measured move. or use fib values, and a variety of indicators and/or studies.  If it seems to work for you, use it.  It has been our experience that simple can work too.

ES:

The ES began the day in an upward bullish channel (#1). As we have indicated, the global setting is preferred over the rth at the open, but there is no difference after a few candles.   #2 is the BO Targets, the resistance at 1335, a key level, and at 31.5 the support.

With the global,we see a failed BO (FBO) of the channel.  B1 is a reversal, but you would not read that with a rth chart.  34.75 becomes the short.  A FBO and a cross of an element.  The more elements involved in a move, the stronger the evidence is for the trade.  Even if you waited for the lower target BO,  profit available.

For rth traders, b4 becomes the first reversal (ours was b1).  Since it failed to break the lower target, and given the resistance above (channel and EMA), it was not considered.  By b22, the churning was over, and the long was a go, as was the EMA hold at b33-34.

A new consolidation (#5) developed, and a long BO was at b42.  #6 was a narrow wedge off b42, which was a short into the red zone marked at b50-52, and hit on b67.


6E:

6E was in a similar global pattern.  We see a run in price from the support of a bullish TL (#1).  The upper BO Target was set at the failed test of 4200.  B1 becomes the reversal for the shorts going into the EMA.  The TL hold at b4 was your long signal.  This was a reversal for rth charts.

The second attempt at 4200 was another long signal,as was each EMA touch.  TL #2 and BO #2 helped defined the trades off the EMA. B35 was at the #2 TL and was a long entry.

 The bull weakened, and formed a lower high at #3.  This was a red flag.  We did not jump into the next trade at the EMA (#4), but waited for the #3 TL break.  It was an excellent run into resistance around 4265.  This failure (note the declining wicks) and the double element break at #5 (#2 TL and EMA) was an excellent short.

Day is done.

TREND, AND COUNTER TREND

The markets are always changing.  There will be times that going long is easy, and shorting is difficult.  Then we flip and shorting is gold and longs are a test of patience.  We are developing the BO targets to help identify the daily market preference.  These targets have worked well.  The short target today was 1350 for the ES, and price spent the day meandering to the 1335 support.  Super!  Another great day where the target worked.


TEN HOURS AGO:


click to enlarge

[08:20] <Chartmaster> gm all
01[08:21] <Chartmaster> 56 nice sh es
[08:21] <omitted> trade report at 8:30
[09:27] <Chartmaster> I know many of you use rth charts, but the glob has a well defined channel ema shorts 6e
[09:30] <Chartmaster> ES in channel from upper resist glob 1350 key level again (and) ema shorts

So far so good.  First trade was an ES short then a 6E short.  Market was heading lower, short trades were working.  It's going to be a super day.

Now read the introduction again.


Notice I say the markets change.  Traders must change too.  Here was the key for the day.

09:43] <Chartmaster> thinking we see the pull down into news, digest and turn bullish for us.. 6e and es

That comment set the mental tone, the trader bias; and the day was filled with counter trend longs.  Counter Trend Trading has a cost:  the opportunity to trade the trend.  1350 to 1335.  Do you know how many traders would love to have a trade like that?  OK, it was not a straight line.  More a drive through the countryside with twist and turns.  But I have no doubt that there are professionals sitting somewhere reflecting on that very trade.

Your mental tone or trade bias is very important.  It will carry you through some fantastic trades, or it can take you into a trade destined to fail.  If the market is shorting (today) and your trade bias is still long, then you have two choices:

1. You develop an ability to counter trend trade.
2. You take a break.  Take the day off.

I do not include change your bias, as I think it requires more than some simple statement "OK let's change."  Most traders can not change as fast as the market.  A trader see five bull days, they bull trade day six!  Then get killed when day six tanks.  Your bias, your psyche, your depth at reading the charts, your ability to take some heat, how you handle greed and fear, and your trade executions all make you the trader you are, or want to be.

Taking a break is hard.  We want to be in the game, compete.  If that is you, then learn how to CT.  "Trend is your friend" is nice, but traders can get into trouble trading the trend too.  CT has received some negative press, but a complete trader, a total trader must be able to trade, effectively, trends, CT, wide range days, and narrow range days.

Find your trade techniques.  Improve them.  Then see if you can develop trades for any market, and try a few CT's.  They are trades.  But they carry an opportunity cost if your a "trendie".

ES:

We began with a strong bear channel #1  and out Target short BO #2.  A pre-open trade worked perfectly.  Then #3:  a CT bull trend that turned micro. Find the blog that discusses the rising-declining TL.  This bull was fading and a second long failed.  The loss was limited,and really not important. What is important:  failing TL. ema resistance, narrow bear channel.  Easy now; but saw something, or wanted to see, in real time.  Bear continued to support at 1335.  The next setup is where we play a 50% break of a prior control bar.  # 4 and  #5  were bull CT TL's.  The higher low was a natural long.


6E:

6E started with a steep bear channel.  The first trade was a short.  Then CT became the favor. It is what it is.

HOLD OR FOLD

Sooner or later, it will happen.  Your bias is correct, the market seems ready to follow, and you enter the trade.  Then price sits. Now what?

The amount of time you hold a trade will affect the risk assessed before the trade.  If you are flat or slightly negative, market events can run your stop quickly.  When it doesn't, you hold and hold and a whole new set of psychological issues arise.  Stay with your gut feeling, or take a loss (and at what level).  Look at these scenarios and decide now how it will affect your live trading.  I say live, because you will not get this using Sim.  Sim is used to practice techniques, setups, and your trading software.  You will not see the emotional attachment found in live trading.

1. You take a small loss, then see price move to profit or run.
2. Take a larger loss, but not you stop, and see a profit move or run.
3. See an opportunity to get out, ignore, and price moves for a greater loss.
4. Scale in to adjust your average price, and see it work or see it fail.

These will effect your trading if you do not prepare, and be willing to accept each trade as an independent action.  Do not let a trade, good or bad, affect the next trade.  Take a break, stop trading.  Do not over analyze, but review and see if there were clues for or against the entry.

The trade in question is on the ES chart and marked with a red bar.  The same entry worked later, but the first attempt was a challenge.  Let it go, move on.  There will be another trade.

TODAY:  6E


[09:29] <Chartmaster> mkt open us ES 46-50 targets 6e 4353-4320 both in short term pb's toward lower support. 1345 defined bull mkt for es,however we need a break above psych level 1350 longer term rectangle es 35-50

[09:34] <Chartmaster> aggressive long es 1348 4345 6e


click to enlarge

The upper and lower BO targets (1)  and the aggressive target (2) were added, and the first alert (of many) went out.  The lower target BO is  a first attempt, but considered more acceptable on the 6E.

Longs entered, and provided the second trade.

 [09:48] <Chartmaster> longs in es 6e
[09:51] <Chartmaster> exit 6e 4330 +10

The alert continued as we saw weakness near the top target, or TL support at Trend lines # 3  and # 4 that developed.  #4 allowed us to take an afternoon good TL long, and a great one.


TODAY:  ES

click to enlarge

The ES started with an alert early in the session.  BO targets #1 and #2 were recorded, as well as an new aggressive entry point.  The AEP was our first trade.  A short was productive, just prior to the symmetrical triangle.  The feeling was, price would break higher.  It did, at TL #5, but first showed a retest of the important 1348 level.  A better entry in hindsight, but the long entry was being held.  This was the opportunity cost of the hold trade.  Got out of the hold and took a break.

Another opportunity, same price entry, 55-56 targets hit.  Let each trade stand alone.

TARGETS AND ELEMENTS EQUAL PROFITS

TODAY:


[07:25] <Chartmaster> at 1345 es becomes a bullish mkt we had 1 test in the euro zone open would expect us open to test again

[09:27] <Chartmaster> ES 5m bo targets 38.5-34.25 resist 41.5 and 44.5-44.75 bo 45 turns mkt bullish http://screencast.com/t/leeEit6W1C

ES received our first alert.  As we have indicated numerous times, the first attempt is aggressive and you should allow for a possible failure. Had b2 gone green, a long would be considered above the target.

We did like the TL pullback and entered at 37.5 with a partial 38.5 exit followed by a stop out at +1.

The 6E received the second alert as price probed the lower target.  Traders had entered short when two elements failed- the EMA and the TL.  If we have more that one element that price is breaking or rejecting, we have a higher confidence for the trade.  B6 BO netted +10 and a +12 on the stop.  The pullback to the target- a market validation test of the target, provided an additional opportunity for Euro shorts.

[10:38] <Chartmaster> 6e at 4252 30 below bo target

[10:52] <Chartmaster> 6e paying big now nearly +40 from bo more if you took the tl and ema failure. es continues weak as new tl's develop 1335 key support level potential for db h&s variation http://screencast.com/t/KsiApzAuw

[10:55] <Chartmaster> let it run.. es long (link deleted showed orders)
[10:57] * Chartmaster ----[ covers part @ 37.75 +2]----
[11:00] <Chartmaster> stp to 37.5
[11:03] * Chartmaster ----[ covers bal @ es 38.5 out +2.75]----

[11:08] <Chartmaster> alert es 3 attempts to bo upper target feel bulls will try again for mid upper 40's

[11:16] <Chartmaster> es longs entering at 38

With the ES holding at a new TL, we added to the long hold to improve our position.

[11:46] <Chartmaster> es avg back to ema

This worked nicely, with exit at 39 (+1.5) and 40.5 (+3),and balance stop out +3.

Out just in time for the 6E alert.  A break above the lower target would be a bullish move.  Traders followed the suggestion and logged 10+ gains.  6e followed the EMA and developed a  new bullish TL. 

 TL, EMA, Target.  Three elements spell confidence in the trade.  If you missed the first alert on the bull beak, there was opportunity with the converging break.

[12:45] <Chartmaster> alert 6e target TL EMA converging

Traders took 1.4290 to the upper target, 1.4340.  Another nice day.

TRADING THE E'S

TODAY:  6E

Remember the diagram from yesterday's post.  Changes in the TL's give a clue about the health of the market.  6E begins pre-open with a steep bullish TL, and appeared to be heading for a BO of the top target at 4550 (#1).  The PB close at the target was positive, and the next bar did yield a 5+ opportunity.  This is an aggressive target BO trade as we have no prior test of the target.  A + or - on this depends upon the trading management of the trader.  Even if a loss on the first reversal, the BO of a steep TL tends to be bold and, in this case, it was reasonable to think the EMA would be a magnet.
The testing of the BO target can be seen at the lower target (#2). Bars 3-5 test it, and are trapped by the EMA.

One thing we are trying to do is issue an alert when price is near/at a key decision point.  It is easy to see on the chart, but traders are involved with several trade instruments and may not be focused upon this particular chart.  No doubt it would work better if automated, because price can move fast, and the first priority is to enter/exit a trade; not write about it.

After that trade, a new BO target #3 was added.  Also note the new TL, and that it is declining in angle suggesting market weakness.  Two or more key elements being broken is a must take trade.  By b24 we have EMA and TL failure, leading to the bearish TL #4.  Price declines Ala an elevator and stalls as it digests the action.  New afternoon targets  #5 and #6 develop, and produces.

Watch for the alerts.  They will be as timely as possible without a compromise to trading.

click to enlarge

Sample commentary:
[10:04] <Chartmaster> alert 6e lower test declining ema
[10:06] <Chartmaster> 6e +5 runner at be +1 4886
[10:09] <Chartmaster> 6e stop to 4480
[10:11] <Chartmaster> alert es weakness above the bo
[10:11] * Chartmaster  [ covers 6e @ 4480 +5 bal ]----


[10:23] <Chartmaster> alert es and 6e bull bias aggressive bullish long
[11:19] * Chartmaster  [ sells es @ part +2 stp at 48 ]----
[11:19] <Chartmaster> alert es conservative upper bo
[11:21] * Chartmaster  [ sells es @ part +4 runner 49.5 stp ]----

[11:29] <Chartmaster> alert 6e at lower bo
[12:08] <Chartmaster> away working trades es out bal 49.5 +3 6e bo 4585 (typo 4485) still in a 1c runner.. the gift that keeps on given..
[12:10] <Chartmaster> mega candle 6e exit 4430

[12:41] <Chartmaster> another elevator ride 6e   (note: 12:40 1 min entry)
[12:41] <Chartmaster> alert es at lower bo short
[12:46] <Chartmaster> es per blog discussion we like 2nd attempts for the bo (aggressive is first attempt) see b35-38 holding for possible bo ema negative we take the trade same for 6e bo http://screencast.com/t/z8G4ao0EyV
[12:49] <Chartmaster> es exiting 1340.5 NOW 6e 4370 stp
[12:52] <Chartmaster> stp hit 6e

[12:55] <Chartmaster> am  bo 4518/4485  pm  4438/4496
[12:56] <Chartmaster> es still 42/50

[13:07] <Chartmaster> current look 6e es 5m http://screencast.com/t/dPdONPRyu
[13:10] <Chartmaster> alert es at ema
[13:12] <Chartmaster> shorts in es
[13:13] <Chartmaster> 6e elevator lol
[13:13] <Chartmaster>  same setup 6e
[13:14] <Chartmaster> exit es and 6e
[13:17] <Chartmaster> +2 es +10 and +20 6e out and done..


TODAY: ES

Traders will watch to see if instruments begin to sync, or move together.  ES too had a nice pre-open pop, tested the upper target, (#1) and returned to the EMA.   It stayed above the lower target #2 and formed bullish TL.  The entry was at 46.5, and b19 hold at the EMA should have been considered.

Price briefly crosses the upper target,and begins forming a bearish TL.  B29-30 is breaking two conditions (TL and EMA) and should be a trade consideration. Price is moving away from a declining EMA.  Your hold should be to the lower target #2, or cross of the EMA.  The target fails, and  so does the CT pullbacks to the EMA.

TRADING THE E'S: ES AND 6E

Post in this blog have included trades showing the gains, and without them. Trades have been entered in financial chat rooms.  From that effort, there is essentially three positions a trader reading either can respond.  These are responses anyone can have to any post, book, webinar, etc. they come into contact with as a trader.  The responses are:

1. POSITIVE  you view the information, see the trades and think there is something to it that has potential to help you.
2. NEUTRAL  you view the information, tends to lean positive, but may not see yourself doing it.  This is a confidence, practice issue. 
3. NEGATIVE  you view the material, and, for whatever reason,  your not open to any of the information.

I bring this up, because I am excited about the blog views we are getting, and the diversity in the locations of viewers.  Thank you for allowing this blog to reach the success it is showing.  Some exciting "new paths"are in the planning stage.

Tonight, the blog direction is about trading the E's:  the ES and the 6E.  AND...

NO trades will be listed.  The approach tonight is to give you a "plain" look at the chart, and then a "let's tell the story" look.  After all, I can tell you how great it is, and some will go negative.  To be honest, I can see how it affects them.  And if I were in #1 or #2, I would like to see the "why."  I need to know it could work for me if I understood what was happening in the market.

TODAY:  ES


click to enlarge

The story

1 & 2    support and resistance for the open is established.  1335 is a key market level.

3           is a bullish TL, and the dash lines are the extension over time.

4           is the bearish TL seen in the lower highs.  A triangle is formed, and the side ways action is expected to break out.

5 & 6   new support and resistance

7          a second bullish TL, but note that it is lower.  (see diagram)

At the bottom of the chart is a helpful diagram to understand how the market is likely to go.  Decreasing TL's  are showing weakness, and the market is expected to sell.  Increasing TL's shows strength, and is a bullish indicator for price.

Price breaking any of the key levels (S/R, EMA, TL, key price levels , etc.) will be short/long considerations.  A failure will be revealed fairly quickly, and some traders will take ALL with x ticks as a stop loss.  We have discuss some of the reasons for/against taking these trades.

Price breaking two or more of these levels is a stronger buy/sell and should be taken within your risk policy.  Today, there were two of these events in the ES, and one very extended case for the 6E.

Review the following bar/bars and make a decision:   b15   b22   b24-31    b26-27   b49   b64   b65-66

A few comments from today:

failure on es to run bullish 1) watch for bounce around 1335 for second attempt or 2) mkt broken we see more selloff to 30-31

alert es bo target short

ALERT es setting up for a nice move

TODAY:    6E


click to enlarge

The story

1 & 2        pre-open long/short targets set.

3               bearish TL noted

4               TL break; exit shorts suggested for more conservative traders.

5 or 6        exit at EMA break; suggested for more aggressive traders



some valuable comments:

 6e in breakout lower range

6e remains sh until tl break; aggressive traders will wait for ema   (4, 5, and 6 above)

The BO target captured two trades.  The second hit the conservative exit.  Others, liked being aggressive.

6E STARTS WITH A BANG

WOW  The first "official" 6E post.

Post about the Euro (6E) will be an added feature to the ES blog post. Sooner that was expected, but when the market performs, it needed to be shared.

 And, as if on cue, the 6E hits a BO target as this post was being prepared.  4810 to 4996 out!

This BO was one of the last post outlooks today, and no surprise to many happy readers.

Speaking of happy readers. last evening we opened discussion about the 6E.  Set some BO targets, and discussed what we were watching in the market that would be of interest for a trade.

[22:32] <Chartmaster> longs at 4777  shorts at 4763
[23:01] <Chartmaster> shorts moved to 4770

[09:38] <Chartmaster> from some discussions last evening. adding 6e to blog some happy people 100+ overnight action

They were happy.  I was happy.


TODAY:

Tough act to follow. 

But  we are always happy when the market "plays our song".  Here are a few post and the screen shots for today.  This will not be our normal format, but given so you get the jest of the trades.

[12:56] <Chartmaster> 6e in more favorable position to consider long tl and ema
[12:59] <Chartmaster> es long 1342
[12:59] <Chartmaster> longs entering 6e
[13:18] <Chartmaster> out +6 6e holding at ema
[13:26] <Chartmaster> long hit es   you had lower entry (name omitted) good job
[14:52] <Chartmaster> current 6e bo targets  (deleted link)
[14:58] <Chartmaster> 6e alert
[15:00] <nick omitted> watching chartmaster
[15:02] <Chartmaster> ding 4832 sh
[15:03] <Chartmaster> +8 6e bal at be
[15:04] <Chartmaster> 6e +10 out bal
[15:04] <omitted> it may flush chart master
[15:05] <Chartmaster> or bounce at 20   ;)
[15:05] <omitted> 4796 on 6e am thinking if doesn't
[15:05] <omitted> vn chart
[15:06] <omitted> vn post and trade
[15:47] <Chartmaster> last look 6e bo lower target can see that channel continue  (link deleted)

The BO

click to enlarge

The BO discussed in the chat,  and the after hours BO focus.  A break below the yellow target for a possible continuation of the downward channel.

And, as if on cue, the 6E hits a BO target as this post was being prepared. 4810 to 4996 out!

The post on 6e starts with a bang.  A beautiful song indeed.

IMPROVING YOUR CASE FOR A TRADE

Breakouts and a broken (temporary) market are an excellent combination.  But knowing where to look for a trade will improve your ability to be successful with the BO.  The better your case for a trade, the higher the probability it will be successful.

TODAY:     (check out our 6E post too!)

When playing the breakouts, we want to look for key signs to improve our odds for a successful trade.  The risk is a failed breakout, and that risk can be a move to the opposite target.  Today, that would be a move from 48.50 to 54.5, but no one would ever suggest you hold for a negative 6 points.

B3 hit briefly, and pulled back.  So why is it a riskier (I did not take) trade, even if you have a 5-8t stop, and what suggested it could be a failed breakout?

1. Look to the left of the yellow BO bar. We have a failed bar above our BO.  Shows buyers.
2. We have small body bars at the EMA prior to the open.  Suggests indecision as to direction.
3. Bars 1 and 2 probe, but pullback to EMA.  1350 still has buyers; psychological point as well.
4. B3 pushes; is looking good, but it is the FIRST test.  They tend to fail.  B3 would be much better had it moved passed the target with vigor, allowing an entry on a pullback.

Building the case:

Bars 4 and 5 fail at the EMA and we have a symmetrical triangle pattern developing between our target and the EMA, which is rolling over.  The target is 2t below b4 and 5.  A common short play here would be 1t below.  The EMA weakness, and bar structure provides an improved chance that the second BO will be successful.

The second build-the-case is in the second target zone.  Although we traded at the EMA, the upper BO worked as well.

1. Bars 50-53 are small body closing below our target.  Market will break, or fade and rollover.
2. B54 test the target.
3. B55-57 reverses and stall at the EMA.  This provides support, and potential for a second test.
4. B58; Home run.
5. B58 is the candle with "vigor."  Had it occurred earlier, we would look for a pullback in the candle to enter, or enter at the close.  Above the target, but still a valid trade with potential.

Build your case.  Improve your odds for success.


click to enlarge

PLAY WHAT THE MARKET GIVES US

TODAY:

Where it all starts:

[09:19] <Chartmaster> es tight range for bo consideration. long 1354.5 collected +1 +2 last evening. range at open long bo 1354.5 shorts at bo 1350. 1350 key for longer term support. break is significant weakness in mkt




click charts to enlarge

The day starts with a determination of where the market will find  breakout buying or shorting.  These points vary with each time frame, but we generally are using the 5m.

As the day continued, two bullish trend lines developed.  These offer support above the sell target until broken.  Watch for areas of congestion:  any combination of the EMA, TL, L/S targets,etc.  Breaks at these points tend to be extended, thus rewarding to trade.

After midday those trend lines are broken, we have a failure at the EMA (MAXT type).  The market is showing weakness.  Selling pushes price below the sell target.  That one trade was over 5 points.

Have a plan. Trade what the market gives us.