Saturday, March 30, 2013

Trading Triangle and Wedge breakouts

Triangles, be it ascending triangles, descending triangles, or symmetrical triangles are common enough chart patterns that occur on all time frames. I am no chartist, and am not adept at entering trades when markets break out of these chart patterns. And even if I did get in through proper sell/buy stop placement, I was not clear about where to place protective stops. These images below should explain this process well.

Here's how one would enter the break of a rising and falling wedge, and the appropriate stop placement for it. 

Another article which explains this technique really well is here, this article explains how to set targets for triangle breakouts, but did not mention stop placement. The above images help with that part. 

78.6 more important than 61.8 on ES?

I've been playing around with Fibs on ES over the weekend, and one thing seems to stand out to me. Price has a much higher probability of reversing at the 78.6 fib on ES, more than any other level. I might be curve fitting this, or whatever, but this is something I'll watch for. I drew a bunch of fibs and I'll post charts below.

Example 1 - Fib from 1558.75 to 1528.5 - note how price acts at the 78.6 level, easy short and cover at 61.8?

Example 2 - Drawn from 1530 to 1495

Example 3, 4 and 5 - 

It also works on smaller time frames, check out how it worked in the last 5 days -

Not saying its perfect, but works more often than not? 

Thursday, March 28, 2013

Currency future setups for next week

I posted a GBPUSD setup in the previous post.

Continuing looking at other currencies, here's one I really like - The Canadian dollar. 6C has been in a bear market, and its currently overbought, so its a nice selling opportunity. Look below for where I'd like to short some.

6A or AUDUSD has been in an uptrend, but has found some sellers over the last 2 days. Its still holding a key level, but note how its been sold from the 21 EMA repeatedly? I dont like that. So I'd like to see it above the 21EMA, and then we can try longs with stops below the support level. Otherwise, a break below this support means we sell retraces.

Luck is when preparation meets opportunity

I prepared. Last night, I spent a lot of time prepping all the charts for this morning's grain report. However, thats all I did. I watched as all support levels were crushed. It probably happened way too fast for me to react. I should've used sell stops to enter those trades, and this is one lesson I will carry with me into the next such report.  Look at this mess.

As for the Crude oil post,  I shorted like I planned, but a little higher and covered for a small but decent gain. Crude oil has a negative ADX divergence on the daily, but the upside momentum is still strong. RSI(2) on Crude is like 99? If magically we do get up near 97.9 level, I'll be shorting it for a move down to the 92.25 area where it has some support now.

Natural gas looks interesting here. A break of this 4.01-4.02 level convincingly and we can look to sell rallies?

As for ES, now that we're above the 1560 resistance, whats next? I'm thinking we're about to challenge the all time highs in SPX this coming week. As for Monday's trading - seasonality wise, first trading day of April - $YM_F up 15 of last 18. So seasonality is favoring the upside, and I'm inclined to agree with this, and will buy dips with a stop below 1550. 

Coffee looks very interesting here, seasonality also favors the long side. I'll be planning to get long on a break of this 138 level.

6B looks like a decent short if it continues its upside move and gets to the 1.52 resistance level again. I'll take this trade only if ADX is near 60.

With the 30 year bond, its a pretty simple trade at the moment. Sell moves to 144 '20 - '28 with a stop a few ticks above. Support comes in at the 143 '30, 143 '24 and 143 '14 levels where I'd look for long side trades with tight stops.

Here's a stock I'm considering buying. Facebook! It appears to be at support, so lets see if it holds up. 

I'll post more research if I come across any over the weekend. 

Wednesday, March 27, 2013

Crude oil fibs of interest

Note how price has reacted at each of those fib levels, whats going to happen next at 97.04, I for one will be looking to fade Crude oil there.

Grain markets for tomorrow

Tomorrow is the all important grains report at 9 am PST.

Key levels for the grains, wait for them to be taken out before putting on trades.

Corn has key support at 720 and 710, so I'd wait for atleast 720 to be taken out of it starts to roll on the downside.

Soybeans, 1450 resistance has now become support, I suppose. Under 1400, we see much lower prices for soybeans. If we go up, we start bringing up last year's levels.

Bean oil, my favorite to trade is already breaking support tonight and I'm not happy about it. I wanted to be short it tomorrow, lets see how it plays out. 50.70 and 50 are key levels.

Cotton also has a plantation report, so watch out for that as well. 

No place for fear

Today was a good day of trading which could've been great if I stuck to the plan, didnt chicken out and take profits early.

Woke up late this morning and ZB had moved more than 1 pt overnight! 1 hour ADX(7) around 70, 4 hour price right at resistance. Posted this on twitter.

Shorted ZB twice today, and covered each time for a few ticks.

Big fuck up however was with Lean Hogs, I had clear support and ADX was signaling a possible trend exhaustion, so I bought it, but I got nervous and exited for a few ticks. Chart below for Lean hogs. So disappointed with myself because Lean Hogs rallied non stop right after I sold it. Live and learn, but truly, there's no place for fear in trading. Stick to your original plan and respect your setups.

Finally, I sold BRF as well, for a loss. So that makes 3 out of 3 losers on my Latin American ETF trades. Valid setups, failed trades, but small losers so I guess its ok? 

Tuesday, March 26, 2013

Today's trading

Not a lot to report besides my morning post, I had some good intraday trades in ZB, and shorted TF and ES intraday. Got out of that cursed ECH long trade, so now I'm just left with the BRF long.

Also shorted Crude oil like I posted the setup earlier in the morning, and took some heat on that one, but closed it for a 10 tick profit. Glad I got out of that quickly because Crude oil then jumped to daily R2, which in hindsight would've been an ideal fade level.

Dont see any real setups for tomorrow, so am on the sidelines. But am watching the following:

1. I have a sell order on NQ at 2809, incase we get there overnight or tomorrow.
2. Still looking at shorting Crude oil, but dont like the way its breaking resistance, look at the chart below.

3. ZB still continues to fight 143 '24. Almost getting ridiculous now.

4. Still looking to short Lean Hogs (June) if it hits 92 (and ADX > 60 ideally), but will buy dips if it drops to prior support levels. 

Today's setups in CL and HE

Looking at Crude oil and Lean hogs from the short side today.

CL approaching 96 resistance and ADX(7) over 60.

June Lean Hogs also approaching the key 92 level and high hourly ADX(7).

Entering trades

I'm not a big fan of fibs, but I use them to enter trades at times. I use either the 1 hour 21EMA, or the 61.8 level. Yesterday evening's post, I wrote I would sell Natural Gas on a bounce to 3.92 (hourly 21EMA). So I drew some fibs, noted the 61.8 level was exactly where my entry was on Sunday night! So I placed a sell order there, got filled overnight. Look how well it played out, pretty much marked the overnight high.

Same concept to enter a NQ short, draw fibs, sell at the 61.8 level, again, it marked the dead high for the night. I feel like a genius!

In case someone thinks I'm making shit up, here's the screenshot of my trades.

Monday, March 25, 2013

ZB levels

143 '03 seems like an interesting level, a worthy place to try a long. Price also found support there earlier. If things break down, which I dont think they will, then a break of today's low would lead to gap fill from last week and more?

Missed opportunities

Copper would've setup as a beautiful short had I been paying attention. Note the ADX(7) over 60 and price at resistance. Easy sell, and like a $1000 per contract move.

Cotton held the 86 level today, but there's a plantation report or something out on Thursday, so I'm going to avoid Cotton for now.

6J has broken through the 1.06 level? Has it? Lets see if it consolidates above there.

For now, I'm looking to:

Sell a Crude oil bounce to 95.8 or so.
Sell Natural Gas on a bounce to 3.92 (hourly 21EMA).
Sell DX at the evening open unless it gaps down

Today's trading

Decent day, but my lack of patience continues to hurt me. I shorted Natural Gas at yesterday afternoon's open, and took some heat on it early in the day but there was little volume in that action, so I stayed patient. My stop was above recent highs. Once it started to sell off, I got anxious about giving up profits and covered for +30 ticks. Its not bad at all, and I'd be happy on that trade, but this was a very clean setup. The setup had the following going -

COT data indicating commercials building shorts
ADX(7) on daily > 70, ADX(2) on daily > 95
Very overbought RSI reading

So I expected to make atleast 100 ticks on the trade (cover somewhere near the daily 21EMA). NG ended down almost 1.7%. Disappointed but not unhappy?

I also was able to dump my ILF calls before the selling started this morning, but I'm still holding onto BRF and ECH, which are in pain at the moment.

No other positions open at the moment, will scan for setups and write a post later. 

Patience pays

Here's a chart of NQ I posted over the weekend. I noted 2810 as a major resistance level, so when the overnight action based on Cyprus news pushed equities up, I shorted NQ, because its the weakest among the lot. I was a little impatient and shorted 2801, with a stop above at 2815. Covered this morning for +10. Its selling off some more as I write this, but as usual, I got impatient with the exit. Blah!

Saturday, March 23, 2013

Simple and dumb VIX trading strategy?

Something I was looking at today. What if you faded VIX every time it moves about 20% or higher above its 10 day moving average? Lets say you bought VXX puts.

See for yourself, pretty impressive results. I looked back about 3 years, and it works out very well. There will be some significant drawdowns for sure, so probably a good idea to use options, say VXX puts or selling out of the money VXX calls or something as simple as going long XIV.

Friday, March 22, 2013

Setups for last week of March

The stock markets are at a critical level here, and its hard to call it either way with the Cyprus news upcoming over the weekend & early next week, but here's some observations and possible setups. I'm not posting too many currency setups below at the moment, because they are going to be very news driven for the next couple of days.

NQ is approaching a critical level, note how its behaved when it hit the level marked, so short when it gets there (unless it gaps above on Cyprus good news?), and if it breaks through and holds that area as support, look for longs with a stop below that level.

ZB spent all week between the key 142 '16 and 143 '24 level, with a few offshoots to the upside, but shorts from the 143 '24 level were highly successful for me all week. This week, if we do breakdown in equities, then we clearly will break above in ZB and will need to look at the 144 '08 and 144 '24 levels, for potential reversals, etc.

Crude oil is another one which I am keeping my eye on. Wild fluctuations today but Crude oil closed strongly today and is looking like it wants to target the 94.4 level first. If it breaks down below the 93.50 level, its a short trade, else we buy dips with 93.50ish as a stop.

With Sugar, 18.50 is the battle ground now, above it, we test 19 and above, below it, we are looking at 18ish. But there's no seasonal rally due here. A bottom in sugar seasonally occurs around June, so until then, stand aside or sell rallies. 

RB however, is indeed due for a nice seasonal rally into May. I posted a breakdown chart on this earlier, and that has played out pretty well, now I guess its bottom picking time? 

Coffee is rallying at the moment, but the seasonal rally is not yet here, infact if you look at the seasonal chart here, you will see that the rally is due early April, and the current bounce is infact a sell. I will be using the levels below to look for sells.

Cotton is coming into support here, and should be a nice buy for a move back up to the 90 level which would then be a fade, note the seasonals for this. I would ideally like to buy a test and hold of 86 level.

One addition to the setups, is Natural Gas. No chart here, but seasonals show its ready for a big decline,  and ADX(7) on daily also near 70. I might short it on Sunday.


Friday's trading

Another day, another bond short trade overnight. I've been mentioning the 143 '24 level all week, and again, I shorted there and covered for +8 ticks when I woke up in the morning. It did make new highs overnight, but the risk/reward on the trade was still better than 1:1.

One thing I am really kicking myself on is missing the 6J short, I posted the setup yesterday, but I didn't take it because I was also shorting ZB. Big mistake, if there's a trade, just take it. I'd have taken about 10 ticks of heat, and made about 50!

$ILF is going nowhere and I'll be exiting that trade come Monday morning. Hopefully we dont gap down big on Cyprus news.

$ZL_F came close to giving me a fill on the short, but didn't quite get up to 50.69 where my sell order was.

The $6A_F short I was in, I exited for a small gain, I got impatient on this trade, would've worked out just as I expected and I could've covered and flipped long at the hourly 21EMA. Noted, and will stick to the plan next time.

One other ETF I've bought today is $BRF, which actually lost another 1% today, its dropped 10 of the last 10 days so its as oversold as things get, and definitely due for a rebound.

I'll post charts and other setups over the weekend. For now, its time for a little R & R. 

Thursday, March 21, 2013

Setups for today

Not a lot of trading today, there were some nice moves but I was not in them. I'm currently short the Aussie dollar, but not too happy with the trade, will let it play out though.

A few setups I'm looking at for this evening and overnight -

6J is at resistance and ADX(7) close to 60, waiting for +60 reading and price to push a little higher.

Soybean oil has a similar setup

Not looking at any ES trades, but will look to fade ZB if it hits 143 '27-'30 area. 
For tomorrow's trading, since there's headline fear over the weekend, ES might sell off a little. So if VIX rises drastically, I'll look to fade it via XIV. 

Wednesday, March 20, 2013

Wheat and ADX

Something I noticed today as I was flipping through charts. Notice how wheat behaves when ADX(7) on the hourly crosses 60, almost invariably retraces to the 21EMA. Its a nice counter trend trade, with low risk. In the last 20 days, didn't fail once.

FOMC day trading

Today worked out pretty much like I mentioned in yesterday's post - "Selling ahead of FOMC tends to actually bullish for the market after the announcement."

We got a monster gap up in ES today, and again, like I mentioned, dont fade gap ups on FOMC day. The end of day selling is worrying for bulls, but lets see how the next few days play out.

I was able to sell the GOOG calls( bought at $22, sold at $28.9) , FXI calls (bought at 2.65, sold at 3.4), XIV (avg was like 21.6, sold for 22.85). I also shorted ZB again over night, which seems to be working out for me lately. I'm still in the 2 latin america ETF positions, so lets see how that works out.

I was content cashing out on existing positions and not getting caught in the FOMC madness, and all in all, I had a good day. For later today, and tomorrow, I'm looking at:

ZL, break out above 50 should bring 50.70 into play:

I have no real reads on other markets at the moment, so I'm going to wait for setups.