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Ideal trades

Today is developing like sideways days with fairly decent range. So far, around 12:00, we are at 340 points and I would like to show you how ideal trades today should have looked like.

First trade, I took this one, was at 9:15 and it was break above opening range. Entry was above 29410 (point 1). That was break of mid point between pivot and R1. Market quickly relied to R1 and made high of the day at 29600 (point 2). Close could be in that region, so potential profit of 180 points was on cards. Let’s be honest and say it was 150 points with slippage and brokerage.

Second trade, if you are more aggressive, could have been around 29540 on 9:55 bar, with stop loss above high of the day, with risk of 60 points (point 3); or if you are less aggressive 10:20 bar where we closed below 20 exponential moving average (point 4). Market slowly ticked down and tested 50 exponential moving average. You can see how volume increased at that point. Marked did close below once, but just for following bar to close above (point 5). One could have closed position there, but at that point we didn’t know if market will drop further. After that, market bounced back and tested 10/20 exponential moving averages, which was followed with drop again, but on much smaller volume than what the case was on first test of 50 exponential moving average. At 11:10 market traded below 50 ema, to close above it (point 6). This was back test of low made at 10:50, but on much smaller volume. Ideal place to close that short was break of high of that doji, around 29400. So, that could have been possible profit of 140 or 80 points, which is a very nice profit.

That very same point was nice place to go long and that long would still hold, with stop being close below 10 and 20 exponential moving average. In meantime ALSI tested R1 again so that long could earn you some 200 points.

I made first trade, marked with arrows. Then, I made second trade of less aggressive type, but I’ve missed that clear bottom and I’ve closed trade for 20 points loss. Not being focused to spot that low caused me to lose about 100 points on short side and I’ve missed opportunity to be long for some 140 points so far.

Someone could say that it is easy to see in hindsight, but those clues were on chart, as market developed.

Trade with trend!

Thursday Reading

Bespoke:

Homeownership Rate at Lowest Level in Over 10 Years

CXO:

Stock Market and the Super Bowl

Globetrader:

As sharp as it gets!

Nothing to add…

Quantifiable Edges:

Recent 1st Day of Month has been Especially Strong

The Big Picture:

Naive Science and the Nature of Financial Markets

How U.S. Income Groups Get Squeezed By Food Prices

Wall Street Pay Hits Record Highs (and . . . ?)

Fun!

Inflation Rates vs Your Birth Year

Trading the Odds:

February’s Seasonalities

Top40 30 minutes chart one more time

We will review once again J200 (Top40) 30 minutes chart to see what the possible outcomes are.

J200 broke trend line few days ago and did back test it on January 27th, making at the same time first lower high. After making that high J200 plunged and lost 1100 points as of yesterday around 11:00. Around that time it tested low that was made on December 10th of the last year, breaking and closing below it for one bar, just to close above it immediately on the next one. From there on J200 bounced back to test 20 exponential moving average and it was stopped there and closed below 10 ema.

Very important level to watch is that low from December and yesterday. If that is broken there is very little support all the way down to 27000/27100 zone.

On the upside, close above 50 exponential average coupled with making higher high will bring bulls in control.

Trade with trend!

Top40 30minutes chart for January 24th

Quick update for Top40 30minutes chart.

Rising wedge was broken on Thursday and break was retested on Friday and again this morning. Together with break 50 exponential moving average (blue line) was tested and proved to be a strong resistance. Market dived after initial strength this morning and it is currently some 350 points off the high.

There is another less sloped trend line on the chart, exactly where Top40 got stopped. Bellow that line is horizontal support around 28200 and if that is broken we will have very little support all the way down to 27100.

Dow theory is still pointing towards bull run, market made only lower high with no lower low yet. That will happen if 28415 is taken.

On the upside watch for close above 50 exponential moving average and new higher high above 28835.

Trade with trend!

Top40 end of the week review

First three days of last week produced some sideways trading, making it five all together with last two days of previous week. Thursday and Friday brought us some direction, one big down day and one solid up day. All together, Top40 closed between 10 and 20 exponential moving averages on Friday, while close on Thursday was below 20 exponential moving average, third occurrence from December 1st.

Stochastic and RSI are more or less in neutral position, staying around 50 and together with MACD are still showing negative divergences. My personal opinion is that Top40 will still go down in short term – next week or two. If you check how last correction happened in second half of November you will see that it started with sideways movement, then down day, then market tried to recover and that failed, which was followed with only last two days being strong down days. Don’t expect that market will drop 2000 or 3000 points without any fight from bulls, as they will try to protect their positions in this market.

Dow Theory is still showing higher high and higher low, so trend is still intact, with 50 exponential moving average around 28200, almost paired with previous low. If those two levels are broken, look for more downside to come. On the upside, free money is coming from overseas and that can always push market higher.

Last week I posted Top40 30minutes chart that painted clear picture of rising wedge and potential targets.

Trade with trend!

Sunday Reading

Bespoke:

Global Unemployment Rates

1% Declines From a 52-Week High

Streak Snapped at 37 Trading Days

Simply amazing!

Picture of the Day: Shanghai in 1990 and 2010

Some great visuals that The Big Picture has collected:

Stocks Oil, Gold, Bonds for the Long Run?

Total Market Cycle

Market Capitalization as a % of Nominal GDP

The Media Universe

Recession Recovery by the Numbers

Trading the Odds:

January Option Expiration Week