RANGE BOUND MICRO TRENDS 2/28/13

Today the BO5 bull failed,  In this pattern we expect price to pull back to the long BOT, and look for the range run for a break out of the opposite target, the short BOT, where BOT is the Break out target where one side is deemed stronger than the other.  That struggle today created a range bound day, roughly +5 to -5 from the range.

5 minute ES

Price began low in the range unable to firmly break out bearish.  Early news spiked price through the range and we began to see a resistance at 1518.75, and the short back to the open low.  With this type of price action, the trends are harder to play (emotionally) with all the wicks and tails.  One of the reasons for developing the BOT Range was to eliminate some of this emotion.  "If this, then that" logic is behind the system.  If the LB fails, we run the range, and so on.

To see the difference, look at the next trend that developed off bars 26 and 27.  It actually started off a 50CB 45 degree line from bar 19.   If you were nor "range run" long on bar 19, you should be able to decide after 4 and 5 hits of the trend line.

The next TL developed as the BO5 failed around 1524 and price fell below the EMA at bars 62-63.  Another 4-5 touches that failed to break the trend.  Action?  The TL is  suggesting strong bear bias.  BOT action was saying the same...

TWO THINGS ABOUT A STRONG TREND 2/27/13

one point range bars

THERE are two things ( more I'm sure) about a strong trend:  There seems to be exits at each new high, and there will be another trade for those that are patient.

In general, look for the second or third hit at the trend line (EMA , etc.) that you are using for a measure of support (bull) or resistance (bear).

TODAY:  bullish trend coming into the open.  Bar 330 and 345 could be entries off the TL.  Better was the gap bar after B5 with an exit (at the high area) when the micro trend line broke.  Micro TL's will occur with in the larger time frame daily TL.  Both have play advantages.  I prefer the micro as it tends to be a quicker in-and-out. From the side you are able to take advantage of the market.  If in a trade and conditions change, traders have a tendency to think " I can wait this out, it will come back into profit soon!".

next opportunity was the TL from B20 to 45.  This was a later trade in the TL around the B35 gap ( price to the trend line) with a MTL break at another high.  B55 came next with an exit at the prior high (1506).

1510 break was considered a short but price failed to run for the bears.  Instead, the trend line was rising suggesting more bullish action.

FOLLOW THE TREND EVEN WHEN IT CHANGES 2/26/13

This is a 1 point range bar chart and I find it help ID the trends nicely.

open:  price in a narrow range and it moved higher to find resistance.  The break of that stall was the short and we see TL 1 developing.  The EMA offered additional resistance for adds or new entries.

Three lower support areas developed and we had our first failed break out by the bulls set up TL 2/  Two additional attempts by the bulls created a resistance neckline that would be a long on the break out.

When TL3 was in play, longs were taken to the first high area  on TL 4.  Some remained short and continued to add contracts.  If you have the bullets and emotional control, play YOUR game.

The first counter trend play was a short at the double high back to the EMA area.

TL5 was also a continuation of TL3, and the last long to the double high area was played.

FOLLOW THE TREND, PERIOD! 2/25/13

Not much to say today.  If your against this super trend you deserve to have your account wiped out.  A little mid day price above the EMA  (bar 40-44 area).  There is our standard bear gap from bar tops to the EMA, and bar lows were pushing lower.  A very convincing bear sell off.

COMMENT FOLLOW UP 2/23/13

Piet had the following comment. As it is public, I took the liberty to post and offer some commentary:

I found it hard to decide about a bear or bull start. B1 and B2 were bull bars. Was a break of the low of B2 a sell? I drew a trendline over the tops of B1 and B2. My first sell signal was the top of B8. The close of B16 was te second sell signal. Rejection of the low of B274 and MA. Then I drew a bull trendline using the bottoms of B21, B22 and B23. The open of B29 was a buy as the tow bar doji of B26B27 had no follow through and there is support from the ema's as well horizontal support of the 1506.50 level and my bull trendline. I adjusted the steep bull trend line after B42. I drew a line over the tops of B29 and B32 and a parallel line using the bottom of B32. Then the open of B50 (after the small doji) was a buy. I had a horizontal support line at the 1508.50 level. The doji of B68 and B69 did me think of selling. I adjusted when thinking the bull movement was not over. Nevertheless I did not recognize live the 2 bar doji of B71 and B72 as possible buy. Also I had a bull flag on TREND TRADING: ONE MORE LOOK 2/22/13

Bull or Bear?  All Break Out Target (BOT) lines have been removed to clean up the chart to make it appear as any chart would look.  We have a support and resistance level prior to the US open, as well as a bear trend line.  The B1 range is the magenta lines.

MY READ:

At the open we were in a pull back from a bear trend sell off out of the support/resistance level.   Also note the bearishness in the 20EMA  which was pulled to the 1508 area at the open.  The problem with Bar 1 and 2 is the wicks that hit resistance in the pre-open zone.  With B1 at the bottom of the zone, there was a 1 point upside to the top of the range.  Not much to work with, and B2 could not push past the resistance.  Q1: Was a break of the low of B2 a sell?    I say yes,

Part 2:  I added square markers to draw your attention to an important area:  the space between price and the EMA (or a TL).  Price (bar lows) are pushing away from the EMA/TL.  The market is selling.  Taking a short at the top of B8 ( My first sell signal was the top of B8. ) was a good play.  B8 failed at the B1 range and the EMA.  Your second short at B16 was good as well.  Price was stopping at the B1 range (1507).  It would be reasonable to think B16 would continue the bull B15, but it failed.


From your bull trend line ( I drew a bull trendline using the bottoms of B21, B22 and B23 )  note the square markers:  a gap between the EMA and the tops of the bars; BULLISH.  (see follow up question)

COMMENT to additional Question:  top of bars to EMA gap is bearish and bottom of bars to EMA gap is bullish (as you indicated). I like to look at the "Bottoms-bear/tops-bull" as well to see if price action is pushing away from the EMA.
Since we were discussing the bull, look at the area of bars 22-32. We have "tops" pushing higher, but "bottoms" are some what stable on bars 26-32. Is there a bull gap? Yes. That is ok by itself. Just add top reads too. Bars 37 to 43 are rising and we have a strong bull gap. but look what happens when price begins to stall at the tops. A pull back at minimum, a reversal when a market change occurs.

All in all, your reads are getting better.  Congrats.

CM

TREND TRADING: ONE MORE LOOK 2/22/13

NICE week of trading and we end on a trending Friday, bear to bull.

Bear trend line to support followed by a break out bull trend from the support. 

Additional support at the trend line was a secondary entry or add-to.

TRADING TRENDS: DAY 3 2/21/13

THE focus of the blog shifted for a quick look at trend trading as an initial focus for new traders.  It has been very nice of the market to work with us to help with the discussion.  The trends have been fantastic.


TODAY:

Price action was stalling around 1506 area.  As a new trader you would not have the experience nor knowledge of the Break Out Targets.  But you would have a two bar pull back to  EMA with a third bar breaking it.  This is a steep sell off, (bearish) trend that is playable with your trend lines.  That TL was broken around bar 8-9 for your exit.

The pull back to the EMA would be considered counter trend, and not a play for the beginner.    I do not suggest playing these, until you are confident with "with trend" plays.

In this case, some shorts were covered and a reversal long was enter and held until price stalled around 1504.  You now have a second point for a bearish trend line, and should be looking for a short..  A scalp short was taken for a push to the EMA.  Trading was over due to another commitment.

*******************

WHAT FOLLOWED?

You trend line continued to see hits for additional shorts and/or new entries.  There was a counter trend pull back that broke the trend line.  Around  bar 66 you have a higher low.  Here you should be looking for another push to challenge the bear trend line.  With a higher low, a TL break, and a break above the EMA, this is a legitimate long.

Another higher low at bar 78 area was another long consideration.

Continue to practice your trend trades, and practice the micro trends that develop.  You should always be looking for a reason to enter, and just as important, a reason to GET OUT.

TRADING: WHERE DO I START DAY 2 2/20/13

We used yesterday as a starting point to help traders begin the process.  We discussed trend trading as the easier style  to learn as a beginner.  The market was bullish, and we played bull trend lines.

DAY 2, let's try the bearish trend lines.  A great trend line back-to-back day for both sides of the trade.

THE FLIP:

The market flipped to bearish in the Euro Zone and would be the dominant trade.  Again, no counter trend trading and stay away from micro ranges trading.

The one point range bar chart

The five minute chart:

You start by reading what the market is saying, and both charts support a selling bias.  You draw your trend lines and wait.  Play the resistance (yesterday was support) at the trend line, at the EMA, or if you see the trend line hold, play the crossing of the EMA.  YOU ARE ONLY TRADING SHORTS.

Once in the trade with the trend, you try to hold until the trend line is broken, or until your market target is reached.  When you go "live"  this will test your emotions as price fluctuates.

 You will develop your trend style with practice.  Note the two mini trends within the day trend.  Each had an entry point per the trend rules, and both had an exit when the trend was broken.  Until you build experience, the mini TL will likely be your trade.  Holding for longer periods will test your emotions, even with the trend.

Should price break the trend for the day, you stop trading and draw new trend lines with the information.  Wait, analyze, trade.

TRADING: WHERE DO I START? 2/19/13

The question appears in various financial oriented sites.  New traders, or those wanting to learn, need a place to start.  Tonight we look at one of the easier trading methods to learn, and practice for consistent profitability.  The TREND TRADE.

The TREND TRADE is the first trade a beginner should attempt.  It will require that you analyze the market to determine a trend bias, then determine potential entries and exits.  With practice, trend trading is likely to keep you stops safe and allow you to convert your trade to profit.

Learning to trend trade has another benefit. Perfecting your trend trading will be a boost to range trading.   A range bound day is composed of micro trends that run 2 to 5 points and reverse for 2 to 5 points.  Maybe not perfect runs,  but certainly a range that has playable features. 

Getting Started:

1. Determine the trend and play with trend only.  Do not try counter trend trades. and stay away from range bound price action.
2.  Determine the Trend Line.  New entries (or your first) will be at the TL that is supporting price.  Look at the 20 EMA for support as well.  Keep your charts simple.
3.  Set your target and exit.  If price continues, and it should your not trying to capture highs and lows, after your exit beginning planning your next trade.  Where is the TL and EMA?  a pullback to support can be your next entry.  Stay with the trend.
4.  Continue to play the trend until your TL is broken or the EMA if playing it as your support.
5.  For bear trading, the TL and EMA will be resistance for short consideration.

Practice the trend trade until it becomes a habit; a profitable habit.  Only then will you begin to add more tools to your trading style.


TODAY:

You have support at the open and a break out of the consolidation

READ:  trend bias is bullish from the Euro Zone.  There is a consolidation prior to the US open.  The TL's are holding as is the EMA.  Play the touches for your target and use a protective stop below the support.  If you missed the open, look at the opportunity around bar 20 (11 am est). 
Continue playing the support with trend into the close.

Learn the basics.  Practice for mastery.  Play real for  the emotional aspects of trading.

You may not move beyond the trend trade.  When your ready, add a new method and develop it with the same discipline used with the TREND TRADE.

TREND LINES AND THE RANGE 2/15/13

BOT TRADING SYSTEM

WE stayed in the range for ANOTHER day.  Price is consolidating and we simple have not had a break to move from the 1513-1521 zone.   In the Euro Zone, price was rising toward the break out 5 level.  This is a point five point into the bull zone, which is above the long Break Out Target (LB).  The LB and SB are simply an area where the bull/bear is deemed to be dominant.

At the US open we had a reversal break out at the BO-5 and our first trend line.  As we discussed in yesterday's blog, trend lines added to the range helps fine tune the entry-exit of a trade.  For TL trades, a break of the TL is generally regarded as the exit in the absence of other data.  Other data could include an exhausted run which is of interest in the  2 to 2.5 points range around a level.

The Bar 8 shorter took price to around 1519 off the reversal bar and the TL break.  The long target here was the 1521 which we felt would see at least one more hit.

Shorts again, and follow the trend to around 1518, then enter again on the second leg of the bear and a failed push to the EMA.  The target was 1516, the LB level.  Part of the BOT philosophy is that a failed break of a level (today BO-5 at 1521) will run to the opposite level (1516 today).

Price bounced but flashed new shorting around B54 and established a lower high, and a gap between price and the upper level (1521).  This is deemed bearish in nature.  A quick scalp to the EMA was followed by a range run short  back to the SB level (1512.75).

Another nice day for the range and trend lines.

USING TREND LINES WITH THE RANGES 2/14/13

BOT TRADING SYSTEM


With or without the ranges, traders will often use trend lines to help identify their entries and exits.  Definitions will vary, but for the sake of argument let's say 2-3 bars creates a trend.  Connect the bottoms for a bull, the tops for the bear.

Add the ranges, as a gauge of the market buy/sell strength, and you have a nice day for trading.


the open:   a support level combined with a reversal bar at the short break out target (SB).  Price is bullish and enters the range for a range run.  The bull trend line was used for exit timing, and the EMA was considered in a support  role.

1516 was the target for the bull run and we allow a 2 to 2.5 (1518-1518.5) zone for the run to exhaust.  The 1518 area was seen as a scalp short. (considered as .5 to 1.5 points).  Could it be a true reversal and run more? yes, but it was considered a scalp only due to the strength of the bull.


[10:44] <CM> 18-18.5 stall scalp potential


Mid day:   Bar 26 to 29 held at the 1516 support and was a low risk long.  We also got another bull TL to play longs at the TL, or if more conservative, after the Tl bounce enter at the EMA.  The double high at 18.5 was considered another scalp.

Price did push higher toward the 1521 target and later settled around the 1518.5.  Nice, but some days early trading is all it takes to be happy.

PRICE CHECKS RESISTANCE & SUPPORT 2/13/13

 Price was relatively stable over night and the ranges were unchanged.  The difference?  Price was expected to make a run on the 1521.

[07:40] <CM> 1521 upper target today with a 2-2.5 point allowance for a failed break out or exhausted run stalling.(1523-1523.5) a gap between price and 1521 or the 2-2.5 stalling would likely sell off back to/near the 1516 support

1521 was the important resistance.  Price has two choices when a target is in play and expected to exhaust (trend end).

1.  Price falters just below the target and reverses.
2.  Price exceeds the target and falters in a 2 to 2.5 point range then reverses.

When price follows either, it is likely to sell off back to (or near) the original break out target.  For  price below the range, it would buy back to the range.

This return to the range (buy or sell) is a test of support/resistance before the next push by either the bull or bear.

Option 3:  when we are anticipating a break out expansion day, price will run the target and move another 5 points., albeit today was an exhaustion day.

The three option for a break out, all depending upon the day type.

BULL BIAS DAY 2/12/13

BOT TRADING SYSTEM

The market hit a reversal low around  12:30 AM EST in after hours and showed another bull trend line hit around 3:30 AM EST.   Our first longs were on that trend line at 7:40 AM EST.  Price was in a strong bull, and likely to reverse (enter the daily range) by crossing the short target (SB).  The exit was near the Middle BOT around 8:30 AM.

The range was unchanged for today .  Price pulled back to test the support at the SB (1512.75) and longs were entered on bar 2.  Exited part on the bull bar push (bar 5) then the balance on bar 7.  Both strong bull push bars.

The range run (from 1512.75 to 1516) was completed on bar 12 around 10:25 AM EST and pulled back to test the EMA and Middle BOT where it bounced around for hour and a half before bull resumed their drive higher.  By bar 50 area (13:30 PM approximately) prices was judged to be exhausted and a pull back to the EMA could be scalped.

RANGE BOUND GRIND 2/11/13

BOT TRADING SYSTEM

 The range was narrow today and we had a pre-open 50CB at the middle BOT around 8:35 AM EST.  We would see this become a barrier to the bulls.

[08:46] <CM> ES targets of interest today 1516-1414.25-1512.75

At the US Open we had a break out of the short BOT that stalled at 1511.  The thought here was that we were likely to see a stalling around SB +2 to 2.5 points, (1510.75-1510.25).

  An early long  (target listed) was taken that hit the stop out as B7-8 failed to continue the reversal into the range. Targets good, entry aggressive,  the stop did it's job.   Bears had one more push to settle the low of the day at B10 and  was a better confirmation on the stall.

[10:10] <CM> 14.5  15.25    (upper target for price)

[10:22] <CM> no  looking for a stall at sb-2 to 2.5  like b10 lod

 A new long was entered for the stated targets, and additional entries were taken  in the narrow range  and at the bull trend line.  Not an optimal day, but the range expected worked to our advantage.  You have two choices:  avoid the market or play what the market has to offer.  We will not have 5, 10, 20 point run days every time you trade.  Your tools need to include the ability to play range run days, break out days, and narrow, range bound days.

AS IF THE MARKET CLOSED AT 10 AM 2/8/13

BOT TRADING SYSTEM

TODAY we had a range run, the break out to +5, and...

Price Action (PA) that hovered around the BO-5 for most of the day.  Essentially, the best the market had to offer was over by 10 AM EST. One very extended consolidation.

Typical, for BOTs anyway.  So what was the play for today?   We had Short Break Out Target (SB) support (a failed break out) which implies a range run and attempt to break out the opposite range, in this case the Long Break Out Target  (LB).

[08:47] <CM> ES range of interest today: 1507.75-1506.25-1504.5 (rounded to nearest .25)

[09:33] <CM> here we have an LB bo  long break out target  thus bull favored for a +5  a 2-2.5 point failure is likely to reverse the range

We have the range, a run under way so a BO was favored, and a run to +5 (1512.75) expected with the run likely to exhaust in another +2 to +2.5 (1514.75-1515.25).

 The only play after the BO-5 was to short the pullbacks, or long  when the PB began to reverse for the high.  These small range "rolling" highs-lows are high risk trades, t unless you catch the true break out the returns are minimal in comparison to a good trend run, and the consolidation can take hours before we see a true break out.  The better trade would be wait for the break out and enter with trend on a quality pull back.

RANGE BOUND DAY 2/7/13

BOT TRADING SYSTEM

Before the US Open price (PA) was trapping within the range and finally moved up to test the long break out (LB).  It failed (FBO) and ran the range to the short break out (SB) and continued for the break out +5 (BO-5).

Albeit we announced a range bound day bias, it does not exclude a BO-5 run and a return to the range.  The bear was showing some signs of reversing. and we generally look for an area 2 to 2.5 points beyond the BO-5.  A tick and 1 point range chart was flashing long at 96 and 96.5 respectively.  These were aggressive long (and a stop area) with a conservative entry around 1499 which was the first signal on B12.  Trend lines will always be an important addition to the ranges, and they began changing in the same general area as the reversal signals.

The targets for these longs:  target 1 the first 50CB bar at 1501 then the next at 1504.  1504 would be taken rather than waiting for the SB at 1505 since this was deemed a timely exit.  Price was expected to stall at the 1504 and could take 1-2 hours to reach 1505.

PA pulled back to test the 1501.5 support (a lower risk long), then ran for the 1505.

All-in-all a nice trading day, and range bound....

FOLLOW THE TREND 2/6/13

BOT TRADING SYSTEM


Price sold off in the Euro Zone but failed to break below the SB.  By the US open (just before) we had a gap to the SB which is considered bullish.  The bull TL developed and we are off to a BO-5.

In a break out day, or perhaps any day, there is always an urge to short/long against the trend.  Counter Trend trades are viable, albeit expect less from a CT in a strong trend. and expect some "heat" if your hold against the trend.  I am not opposed to adding to a trade, it may not be in the best interest of the majority of traders learning the game when it is a CT trade.

Can it work?  Yes.  The with trend just seems more productive and less stress.


The TL broke for a better reward short around  B42, and moved below averages and the BO-5.  Why is this better?  It was a TL break, a BO-5 break that was anticipated to return to the LB for a support test.  Another gap, but at the LB.  B50  returned the market to bullish and TL2 developed.

A nice day.  More productive with the trends and reversals.

THE EURO BULL: US BREAK OUT 2/5/13

BOT TRADING SYSTEM


TO understand the US Market today, you need to look back at the overnight trading and the Euro Zone open around 3 A.M.  Trading was actually adequate in the after hours.  Then price moved down for new lows.  LOWS that attract new interest for the bull market.  Around 3 A.M. EST  price began the revived bull run.  We had a narrow gap to the SB near the US open and price moved through the range.  BO-5, then BO-10.

We did not break the bull TL that began at the SB gap.  Even when price broke the EMA support around mid day, the Bull TL held for new long considerations.  When the BO-10 yielded a FBO, PA reversed to the prior level, the BO-5.  Part of the BOT strategy.

GRINDING OVERLAP DAY 2/4/13

BOT TRADING SYSTEM

Maybe it was the remains of the Super Bowl.  Today just seemed different.  Slow grinding, overlapping bars.  The middle range BOT was near the short, so the bias going in was bearish.  Two bulls, a pull back bear bar.  Two bears, a pull back bull bar for the bull, and so it went.  It took us to bar 24 to get four consecutive bar in one direction (bearish).

We had the SB BO  and the EMA was holding as resistance as PA pushed to the BO-5.  Each bull CT channel would break the trend line slightly, come back to test the TL, then resumed the selling.

When yo do not get your nice trend run day or at least some nice bar runs, you can choose to wait it out, sit out, or try scalping some of the 1-3 bar moves.

BO LONG DAY 2/1/13

BOT TRADING SYSTEM


[08:47] <CM> ES ranges today 1503.25-1500.25-1498
[08:47] <CM> bias to long side


Price  ran the range early on news prior to the US open.  PA  broke above the LB, stalled and returned to the MB for support.  With the long bias indicated in the range spread, all pullbacks of quality would be counter trend but playable,

A wedge developed that broke long also and filled the gap to the BO-5 (LB +5 points).  With price grinding at a slower pace, a BO-5 +2-2.5 points was likely the high of the day target for the bull run.

[14:03] <CM> bull bias  but thinking bo-5 +2-2.5 about max

Price hit 1510.5 at B54, 2.25 above the BO-5.  Nice day.