Unlike yesterday’s triangle that broke upwards through the descending trendline, today we saw a very nice triangle break to the downside. I didn’t trade at all on the way down, but I drew my lines & had a close eye on the 760.00-760.50 target which was significant for 2 reasons.

1.) It coincided with yesterday’s low
2.) It marked the end of the descending triangle’s target area (where you take the maximum width of the triangle & project that downward from a break of the base)

With that in mind, 2 more confirming factors sealed the entry. First the NYSE-TICK hit -1000. A +1000 reading in the tick is much more commond than a -1000 TICK reading so this was no small matter in of itself. But then there was a HUGE parabolic volume spike on the 2-minute chart. Again, when you see this kind of a spike happen anytime after an already extended move, it is a often an important turning point and quite frequently can call the very top or bottom of a move.

I entered within half a point of the bottom and price then proceeded to rally 5+ ER2 points. I only bagged a small fraction of that, but it was a solid, high-probability setup and good ending to an already nice day.

Volatility & price dried up considerable in the wake of the annoucement this afternoon of Rumsfeld’s resignation. After an initial foray down and then backup, prices seemed to stablize and look as if they might break in either direction. The signal to which direction came at around 1:25 as prices broke through the 2-minute declining trendline with a surge of volume.

The move was supported by:

1.) A higher pivot high in the NYSE-TICK
2.) A 610-tick Positive Trix Hook (TXH+)
3.) 2-minute TRIX Trendline break

It’s not something you want to trade on its own, but in conjunction with other signals you can draw trendlines on the momentum indicators themselves when looking for breakouts. What convinced me of the plays validity was the volume spike. And with the prior 610-tick price pivot so close and plenty of upside potential, the play had a very nice R/R ratio.

As mentioned in my previous post, I whimped out and closed out my position with only .50 points of what turned out to be a potential profit of 4.5 ER2 points. Just another lesson in what turned out to be a very educational day for me.

Once this morning’s price broke above the 770 range, I immediately set my sights on the 774-776 Target Area. What made this price range so apprealing as that.

1.) It is a known prior area of untested supply. This means that there are A.) Likely still sellers there who were unable to liquidate at the time due to the rapid drop in prices & B.) People who previously bought who will be looking to get out at break even

2.) There was a very nice 2 & 5 minute FFF- that was due to complete at around 774

3.) There was a 60-minute FFF- due to complete around 776

4.) Both prices were also very important resistance levels in the conventional sense as well which only increased the likelihood of a correction

While yes I was expecting some sort of correction in this area, I was by no means expecting the type of selloff that occured for most of today. I made my first short-trade right at 774 with 1/2 my lot szie, which in hindsight was a mistake as all signs were pointing higher at that point. It was purely a, I-want-to-make-damn-sure-I-don’t-miss-this-fade-play type of an entry. I wasn’t too distressed as prices climbed higher as this just meant I’d get a better Risk/Reward on my second half.

I had my stop at 776.60 and as prices climbed towards 776, I saw the signal I was looking for on the 2-minute chart. A parabolic volume blowoff as the NYSE-TICK soared to over 1300! That was all I needed to see to enter with my second half. I kept my stop at 776.60 and within minutes price had fallen a full 2.0 points with more downside likely. Unfortunately (or fortunately, depending on how you look at it), I closed out my entire position when the 610-tick chart started to reverse in order to lock in enough profits to achieve my Net Daily Goal.

Prices never made a new high beyond the 776 & subsequently fell another 10 points during the rest of the day. What a fade!

Its been a while since I have gone over this play, but today set it up beautifully on mulitple occasions. The basic premise of the play revolves around the TICK_%_Indicator that I developed for TradeStation. What it does is measure the % of time over the past X (I use 2) hours that the NYSE Tick has been above the 0-Line. When this number gets to be above 90%, that’s when I go on alert. This is because I have noticed that historically on strong trending days, the TICK spends very little time below 0 & thus pullbacks to 0 should be used as possible entry points.

I say possible because it is possible that the TICK & price could continue to plummet. So to help narrow down on the selection process, I use the pullback to the 0-Line as the signal to draw my declining trendline. I then wait for a close above this trendline before initiating a long position.

Today, the TICK_%_Indicator climbed above 90% around 10:30 this morning. I have circled the subsequent 3 pullbacks & entry points that occured over the next hour. Each entry could have yielded up to 2 ER2 points each. Of course they don’t always perform this well. I will usuually take the first 1 or 2 and see how they turn out. Sometimes the markets can act like they’re going to trend early in the day and then reverse. I also don’t take any of these plays during the first hour of trading as the TICK needs some time to develop its range.

I decided to try using the FFF this morning as a gauge for when to fade the morning’s gap. It couldn’t have worked out better with the 15-minute FFF calling precisely the high of the day. In hindsight, it would have been nice if I could have held on to a portion of my position for longer, but I was happy to collect a 4/5 ths of my Net Daily Goal on my first trade of the day. Really takes the pressure off, I will have to start trying to focus on on making sure that all of my first trades of the day are winners from here on out :-D