As we predicted in yesterday's Pivot Magic Trading Journal,
PERSPECTIVE: section, " . . . a three day [candle] 123
combination, and, with the EU agreeing to save the Greek
economy, this just may signal a mighty Bull run." And in
our opening letter: "Watch for bullish impact over the
next few days."
Just like Wednesday, the move was full of swings and we
only profited due to the bloated Average Bar Size (ABS).
Again we gained confidence in our risk-conservative PMT
Money Management rules, as our funds were protected from
false starts and Price Action backwash.
Enjoy and be well,
DAILY PIVOT MAGIC TRADING JOURNAL - EXCERPT
"Don't gamble; take all your savings and buy some
good stock and hold it till it goes up, then sell it.
If it don't go up, don't buy it."
E-mini ES Z1
Thursday October 27, 2011
1 = Following vigorous overnight trading, Thursday morning opens with a wide gap-up.
A quick PL recalculation for the giant opening gap makes no difference. The tape
presents an Anomaly Multi-top (Overnight, bottom left chart) at the R3.
Notice that this is almost identical to Wednesday's open configuration at the R1!
A = We enter below the R3. The breakout tapes a 123, so we enter with multiple
B = Another 123, this time testing the underside of the R3 Support-turned-Resistance.
Add more contracts, and move the profit-locking stop to Free Trade.
C = Although the huge gap open alters our grid spacing, this tiny candle is actually
a 2-pointer (expand stop, exit, and Maximum Profit Giveback [MPG] placements for the
bloated ABS). It is up to our discretion to either move the profit-locking stop
above the high of the candle (Per our stop rules), or to adjust MPG and place a
mental stop at Giveback Level. Since it is a Spinning Top stall candle, prefer the
mental stop for rapid exit (no Cancel-Replace necessary).
D = The MA has finally caught up to Price Action. Personally (no rule here), I'd
like to call this a failed test of MA to excuse a tight stop above the MA (good ole
The next (white) candle tapes a mid-air reversal, and, with no time exit on the
first sign of white on the following candle, we are simply taken out at our stop.
2 = Successful 123 through the R3. Minimal lunchtime Volume dampens our interest.
E = Another 123 off the top of the R3. Volume is huge (pink arrow), and, in light
of the bloated ABS, we enter aggressively. At the close of the candle, move the
stop to Free Trade and a couple of tiks.
F = A giant white candle puts our position in MPG violation. DVS (pink arrow)
spells exhaustion/end of the move, so we are very happy for the flexibility gained
by placing a mental stop at Giveback Level.
G = Price Action stalls. When this small white candle on diminished lunchtime
Volume demonstrates that the Bulls cannot recover sente, Exit Now!
+/- 5.75 points
4 = A "P" Signal at the MA might qualify as an "S" Signal, but with no Volume
support we must let it go.
5 = See = 4 above. Same story.
Time to quit for the day!
A bit early, a classic "V" check mark pattern (plum lines) EOD Hiccup tapes the
move of the day. A reverse hiccup pushes Price Action to close back at the MA.
(Daily, bottom right chart)
Price Action breaks out from the 123 pattern, heading north
with a giant white candle. Volume wasn't too outstanding,
so on any day but Friday we would expect a breather day to
follow. On a Friday, anything is possible.
BEWARE OF TRAPS ON FRIDAY!
BE PREPARED FOR ANYTHING, AND GUARD YOUR FUNDS!
REMEMBER: Trade the Tape, Not my Prognostics!
Thursday's PMT Chart: