7-13-11 BOT TRADING & BRACKET

Break out targets continue to be the primary trading tool used to direct entries.  Today we saw a test of the upper BOT reverse to the lower or short BOT.  The short was a test also.

The general rules to follow:

1. It is believed that a  FBO of one BOT will run to the opposite level.
2. If the second does not beak, price should run back to the first level for a BO.
3. When we have a BO, a trend is expected.
4. Targets of +5 to +10 are expected.
5. A more favorable entry is one made with a cross confirmation.  Professional tend to move all instruments in near unison.  A long entry should be favorable if another, if not all, instrument is moving with your trade.

Today we had  the LB test with a reversal to the SB.  This too was a test and became the signal for the long.

The ES and the TF were in unison, and the long entries were at the EMA-Mid BOT level.

click to enlarge

Both the TF and the ES had a long signal after the SB test.  Both ran to a +5 level from the LB BO.

The next focus was the flag below the +10 level.  The general rule on a flag is to enter in the direction of the BO bar.  A ES long was tried, but the sideways action at the end of the flag weakened the move.   A bracket was added to capture the break out.

A bracket is simple a long above and a short below the stagnate PA, which will have a BO.

It was good to have some time in the chat to discuss the trade setups.