A second test is common

Drill down to indicators for confirmation

1200 on S&P is seen as an important level.

Flags are bound by parallel lines

There are not only S&P futures, gold futures, oil futures, there is also the 30-yr-bond futures!

Use TYX to track interest rate of 30-yr bond.

Not a day to be short.

Monitor MACD and ROC — take them seriously.

Impose structure on the chart.

AVON – bribery probe – selloff and never bounced.

DEVRY – upgrade and never retraced.

FED language change in fiscal policy rumor – dropped markets – markets spiked down.

Thought for the day:  some days are tougher than others.  Don’t beat yourself up if market was difficult.  Look how well you did today!

Interesting website http://www.frauddiscovery.net

“should have realized move was “over”"

“don’t let profit turn into a loss”

“keep an eye on banks”

“if you clear support and resistance, watch out”

“set profit measuring moves” <– yes, why have I stopped using the Pring approach — I always seem to expect too much!

“draw trendlines, not just support and resistance, and monitor for their breaks”

“entry is done on trend change, not when a trend is mature (or a “move” is mature”)

“get  your emotions under control”

“watch the emotions of others”

“technical analysis of volume is critical”

“volume is a rally’s fuel”

“a large spike signals the end of a move”

“it’s hard to make markets move in the afternoon”

“volume is measure of sentiment”

“my transformation from a losing trader to a winning trader took place when I was able to separate my ego needs from making money” – Mark Weinstein

“My ability to win a high percentage of the time is because I have a real fear of the markets.  I have found that the greatest traders are the ones who are most afraid of the markets.  My fear of the markets has forced me to hone my timing with great precision”

“If my gut feel of market conditions is not right, I don’t trade” – Mark Weinstein

“do not fade a move that’s already a retracement of a spike”

“step back–assess patterns before entering”

Third candle, a doji, seemed to create a top much like pin bars often do.  There was a slight turn down in momentum (second subgraph) but really I don’t feel like we had enough data points to determine a breach in momentum.

Stochastics (bottom subgraph) didn’t substantially breach the overbought area.

The doji was a near rickshaw and it’s lower shadow approached 38.2% Fib.  Once 38.2% was touched, you can see there was a bounce.  I suppose traders had orders long orders in at this level.

Candle #13 I would classify as neutral.   Although it breached SMA(9) it did not close beneath it which cancels evidence of a reversal at that point.

At Candle #15 one would have to redraw the Fibs as a new high was reached.

But with all the volatility, if you waited for Candle #15 to complete there wouldn’t be much meat to pick up before 50% Fib was touched (that being a reasonable target).

The next drop, candle #17 was bearish alright,  but by the time that printed price would be very close to the 50% Fib and so not a good entry.

Basically the upward explosion reversed into sideways choppy motion.

Events such as doji, bearish engulfing pattern, breach of overbought, breach of SMA(9), all occurred but there was no confluece to signal an entry.

For example:  our third candle (bearish or nearly richshaw doji) was not in star formation and the candle afterwards certainly was not bearish confirmation of a trend reversal.  (I actually played that event, so sure of a quick reversal and an even quicker buck).

It’s just not enough evidence — in fact it was NO evidence.  It was an indecision candle.

Timewise ten minutes is a microscopic move.  A bit too challenging even for me.

The bearish engulfing pattern may have attracted novices, but there was no penetration of SMA(9)  and even if there had been the close of the candle already was like a 33% retrace to the beginning of the move up.  That’s because the move up was so short-lived.  There was no follow through on the original move up.

38.2% was fantastic support.  Why I took another short I’ll never ever know.

I was feeling so overconfident by the last few days that I stopped carefully analyzing.

Then I took a third short!  I took the short when 38.2 was violated but it bounced hard off of the 50%.  I had succeeded in shorting at the bottom of the move.

I need to have more respect for support and resistance.

If I’m short, perhaps I need to see the longs as the other team.  Players probably had their buy orders in at the 50% for a long time.   I sold them my shares so they could beat me.

At this point I was a bit annoyed, had three losses in a row but kept trading.  That was a bad mistake.

I have updated my Trading Plan to avoid all this mess.

If I look at the 5″ chart there is a nice bearish engulfing tweezer top printed about 10:20.  Coincidentally this would be profitable too.  Two problems arise:  1) the 1-minute would have given you not only reversal pattern but also weight of evidence three minutes earlier and 2) it is a problem to play candlestick reversals without weight of other technical factors.

As I have seen, I won for a while not using weight of evidence but it eventually caught up with me.  To think that you can play candlestick reversals in isolation goes against the market maxim:  “the market will not give up its gifts easily”.

So in conclusion, I think I will use the eight (8) entry criteria in this model and see if I have better results in the fade strategy.  Obviously I will have to wait longer for proper setups.

I wasn’t drilling down sufficiently into the one minute because I thought i was already looking at enough, given so many timeframes and so many market internals.  That will not be enough to reap rewards in the future.  I was so fascinated with candlestick patterns that I lost my perspective this last few days.

I will continue to take momentum plays that look great (begin explosively) and exit using signals on the 5″/1″.

I will continue to watch market internals before entering and while in the trade.

For fading I must have REAL candlestick reversal pattern and not IMAGINARY one.  I will not anticipate completion of candles.

I thought KG was making a HUGE run up and I was eager to short it and make a fortune.

I thought the move was over.

On the 1″ chart below, I thought I saw a shooting star pattern with bearish confirmation.  I thought criteria for a short entry were in.

WRONG!

I made a decision based on a candle that hadn’t finished forming.  If you look at the 1″ chart, after the printing of bearish doji there is as spinning top with a long wick.  That spinning top indeed looked like bearish confirmation of the doji but the candle had not finished forming.

By the time the candle completed forming, we can see we did not have bearish confirmation.  All we had was a spinning top.

Furthermore, putting on Fibonacci it becomes obvious that I shorted 50% retracement which as you can see held as support for the spinning top and near-dragonfly that followed.

That near dragonfly functioned quite hammer-like and as you can see bears gave up after seeing that printed.

I can’t help but think I am not the only onen looking at the 1 minute chart.

Biggest mistake here was not to draw the Fibs right away once doji was in.

If you look at the 5″ you can see the move was fast.   The spinning top after the long bullish candle marked not only the high of 12.22 but also the 50% retracement within the same candle.  So the retracement occured within three (3) minutes.

It all boils down to one thing.  There was no candlestick reversal pattern.  There was no dark cloud or bullish engulfing confirmation of the one minute doji following the bullish marubozu.  What I thought was a doji on the 5″ was more like a neutral ’spinning top’.  Bearish tweezers on the one minute was in and of itself no reason to reverse.  That was just the 38.2% Fibonacci support being retested.   On the 5″ SMA(9) came up to provide additional support for a bullish case.

Bottom line, considering MAs, Fibs and candlesticks, there was no case for the short which I took.

Here’s various notes from around the trading desk:

“choppy markets are harder to trade” – now that I specialize in fading I don’t agree with this.

“if you keep using the same share size then you aren’t differentiating market scenarios”

“what I did was catch a falling knife in reverse – trying to pick a top” – I am learning to avoid this by watching the market — there’s an idea!

“WYNN got a boost from MGM’s good news” – please TRY to do some sector analysis even though you hate it – start to think in sectors, what are this company’s competitors.

idea: thrust pattern – recognize it, profit from it, very common pattern.

“look for relative strength among sector”

“one needs to submit the trade good and early otherwise trend will have matured too far to enter”

“adx would have kept you safe” – note from my trend-trading days

“modern markets seem to burn everyone before they launch definable trends” – eSignal Learning:  Trading Education:  Archived Weekly Trading Article for 2009.

“a good pattern won’t bail you out of a choppy market.  Move to the sidelines when conflict and indecision take charge of the price action” – eSignal Learning:  Trading Education:  Archived Weekly Trading Article for 2009.

“stocks are forced to negotiate a minefield of conflicting trends, each dependent on different time frames.  your positions need to align with these cycles to capture the profits you visualized in your trade analysis.  But donj’t drive yourself crazy because there’s a limit to your study time.  …not all your ducks will line up in a row before you need to take action” eSignal Learning:  Trading Education:  Archived Weekly Trading Article for 2009.

“painful and boring…read transcripts at least…listen to the conference call…may be 90 minutes but great info…don’t skip it” – Cramer

“check out company quarterly filings, annual report…read the 10K” – Cramer

it is okay to include the wicks when putting up a Fib grid.  measure a ‘move’, not necessarily choppy action that precedes it.

“convergence between pattern and retracement can point to excellent trading opportunities.  Keep in mind that retracements work poorly in a vacuum.  always examine high, lows and moving averages to confirm the importance of a specific level. …Discord between retracement and the underlying pattern generates noise instead of profit.  Move on to a new chart when nothing lines up correctly.  This divderegence generates most of the whipsaw in a price chart.  Alternatively, strong phasing between Fibonacci and pattern exposes highly predictive reversals at narrow price levels.” – Alan Farley, Technical Analysis Tutorial (From TradingDay.com)

Amylin Pharmaceuticals, Inc. (AMLN)

Tried to short AMLN but support in the 17.55 area held.  I didn’t even know there was support there.  Do I sound clueless or what?

Had I looked at the 30″ chart I would have seen it, or even the daily for that matter.

Price was perfectly supported but I was trying to fade it.

It’s easy to see that traders didn’t have reason to short it with me.  Market was recovering from heavy losses starting from 1:45pm.  So even though the market was ‘down’, it was heading up all afternoon.  The market was clearly trending up.

The market didn’t care that I just wanted to make some money.  It was making a minor move down when I entered, but soon continued its strong uptrend into the close.

Not a good idea to short stocks when the market is in a confirmed uptrend.  It was irrelevant in the afternoon that market had sold off in the morning.  The mood on Wall St. had changed.  I was just looking at my fabulous 1min candles for signals, on the 5″ I really didn’t get confirmation.  I thought a bearish engulfing was forming; I anticipated that it would complete but it never did and AMLN went on to make new highs.

I had a very tight stop as it was the end of the day and I wanted to keep my daily profits which I did.

Daily bars were in congestion.

If I compare the AMLN daily bars to the ESV daily bars, I can see that when I shorted ESV at 42.92 at 11:44 this worked much better.  Inspecting ESV’s daily bars, there is congestion as well which is why there wasn’t exactly a free fall to my price target.

The main reason, though that ESV short worked and AMLN short didn’t was because during the AMLN short the market was trending up, working against the trade.  ESV was in the morning when the market was down in the dumps.  AMLN trade was at end of day when market was roaring back.

One other observation.  ESV burst up more violently.  AMLN rally was much more orderly, and profit taking along the way meant that there was no build up of sellers.  By the time I entered short, bears had already taken profits.  In other words, it was not a spike up starting at 2:00pm, it was an orderly trend.  The ESV successful shorting worked off an emotional spike with topping tail while the market was still down in the dumps.

That’s the difference between the ESV successful short and the AMLN short which didn’t work out.

I tried to use the 1-minute to time a short but this time I should have gone out to a one bigger timeframe than the 5″.  I should have gone out to the 15″ which this is a chart of.  On the two day timeframe it’s very clear in hindsight that 16.5 was key resistance.  I wasn’t even thinking price was going up to test that level.  I was so concerned with timing the turning point on the 1-minute.

So on top of everything else I’m doing, I need to ask “where did price go yesterday”?

If I don’t do that I am making a costly mistake.

Other than that, I didn’t repeat the grave errors of yesterday and ended positive so I am happy.  I am starting to realize that I am not going to reach my daily profit until I have a few more strategies.  On the other hand, if I stop making goofs, then perhaps one strategy is enough.  We’ll see.