YM, ES and DJIA Analysis

[brownsfan019]

James (and others following)...

Here's how that YM chart looks now. I am using charts from www.quote.com as I found stockcharts to be too clunky and cumbersome for what I needed here.

At this point, you can see we are a tad range bound here. We have some support around the 13,000 level (note nice, even number) and some resistance around the 13,400 level. I say 'around' as I view these areas more as zones vs. hard numbers.

We had a spinning top that if shorted should have made some profit. Depends on how and where you exited. If we assume that we stayed in that trade until a reversal appeared, we got a nice spinning top on Monday, which was confirmed today. So, if short @ 13,300 (approx) and now long @ 13,220 (approx), our short yielded approx 80 YM pts = $400/contract. Not bad for being in the trade for 3 days.




As for the current long, I would just be cautious that on a nice up day today, we may need to cover this position fairly soon. I see some resistance around 13,400 just glancing at the candles going back 3-4 months, so hopefully you can see that too. As we approach this area, I'd love to see a bust through this level on good volume to keep this long going or give me another reason to short again. We'll see how the next couple days unfold.

[james_gsx]

I agree, I see much of the same just a "wide" trading range.



I also think this is just psychological support around the 200SMA. No one is ready to see it move below that and stay under. But to be quite honest, even with a possible Fed rate cut I think the inevitable fall will come. Definitely a lot of indecision going on right now, but I believe it is pretty clear to see lately that the bears have control.

[brownsfan019]

	Quote:	james_gsx
	I also think this is just psychological support around the 200SMA. No one is ready to see it move below that and stay under. But to be quite honest, even with a possible Fed rate cut I think the inevitable fall will come. Definitely a lot of indecision going on right now, but I believe it is pretty clear to see lately that the bears have control.

I'm not seeing a convincing bear control here. I'm seeing a range bound movement where no one is really in charge. It's back and forth until the bulls or bears say enough (could be news/econ related).

[brownsfan019]

So today provided yet another spinning top...



#1 was the long from 2 days ago.

#2 is today's green spinning top. You'll note that it's above the 200 SMA and below the 50. A nice sandwich going on here.

At this point, we'd be looking for a short if this new spinning top confirmed. If it does, the previous long would be a scratch or pretty close to it. Not all trades will deliver handsome profits, but you can't win the game if you are not in it.

It'd be nice if these patterns were a little farther apart, but perhaps that is telling us of the contracting price action going on currently. This coil will burst sooner or later and let's hope the candles put us on the right side of the trade.

[james_gsx]

I really wish there was something I could add here, but there really isn't. The YM, and ES just aren't in a swing trading position right now. But I think if we watch closely and keep up with our analysis we will be in good shape when the breakout occurs.

[brownsfan019]

	Quote:	james_gsx
	I really wish there was something I could add here, but there really isn't. The YM, and ES just aren't in a swing trading position right now. But I think if we watch closely and keep up with our analysis we will be in good shape when the breakout occurs.

You're right James - either this range bound area provides trades or it doesn't, depending on how you trade. Once it breaks, I think quite a few traders will become interested again.

[james_gsx]

It's this sort of action (range bound choppiness) that occurs during the day and causes my biggest losses. So I definitely wouldn't trade it on a daily chart.

[brownsfan019]

	Quote:	james_gsx
	It's this sort of action (range bound choppiness) that occurs during the day and causes my biggest losses. So I definitely wouldn't trade it on a daily chart.

This might appear twice, so sorry if it does. I typed a response and though I hit submit, but I must not have.

I am going to play devil's advocate here James - while range bound conditions can be hard to trade on the daily, I would argue that it's MUCH more difficult to trade range bound action intraday. Here's my reasoning - on the daily, you take ONE trade and either it works or it doesn't. On the intraday chart, you can take A LOT more than 1 trade and can take some heat depending on the conditions.

In addition, I think the daily provides very clear s/r levels, SMA levels, etc. whereas on the daily these levels are not as strong in my opinion.

Let me provide an example of our ongoing Dow discussion ...

Here's our daily YM chart:




#1 is our long we already discussed. Long at approx 13,220.

#2 is a little tricky due to rollover today. So the chart is deceiving - it looks like there was a giant gap up and that's not the case. It's late, so if my math is wrong here, forgive me. Based on exiting our trade this morning due to rollover, here is what I see:

Initial Entry of 13,220 on the U7 contract.
We exit the U7 long this morning @ 9:30am EST @ 13,390.
Profit from long = 170 pts = $850/contract (in trade 3 days).
We then go over to the Z7 contract @ 9:30am and go long @ 13,490 if we want to maintain the long position into the new contract.

Now, I am by no means a rollover expert and I honestly do not know the exact specifics here on how it works. I emailed my OEC rep to ask how OEC handles rollover day. I assume it's exit old contract and purchase new one simultaneously (or pretty close). Perhaps going into the new contract is not a good idea since the chart is different now. I'm not sure on that one.

Even if we JUST exit our long in the 'tight, range bound' conditions, it netted +170 pts for 3 days of work (56 pts per day average).

So, you tell me - which condition was easier to trade in hindsight? Was it easier to take our spinning top at a strong support level and ride it out for 3 days (or longer with rollover) or go into the intraday charts and trade? In hindsight, did you make 56 pts PER DAY over the last 3 days trading intraday? How about after commission costs?

These are not meant to be mean questions, I am just trying to open that box of thinking you have to take a peak and see what else is out there... and very possible... This long was called in real-time, right here. Did I take it? Nope. I'm so caught up in the intraday trading that I just passed on a 170 pt EASY trade. It wasn't any easier than this in not so great trading conditions.

Here's the ES chart as well:

[brownsfan019]

Here's a follow up observation - there's many theories out there of how to trade rollover day. But take a look at today - major bullish action. Why? Well, one idea could be that anyone long (like our trade here in the YM and ES) is that all the people that were long and needed to get long again, just bid this thing right up.

It would be interesting to go back and research rollover days. There's only 4 per year, so the research could be pretty easy if you have the back data. I would just like to see what each of the rollover days looks like.

[brownsfan019]

I decided to take a peak at the DIA, which is a nice substitution to the YM if futures are not your thing.




The same spinning top on the YM that occurred on the DIA with an entry of $132.30 approx. Current price = $134.30. Current gain = $2.00/share.

To make the $850/contract, you would have needed to trade 425 shares of the DIA. 425 shares of DIA w/o margin = $56,227.50 of capital required.

So, if anyone is wondering why trade futures, here you go - you could have either 1) traded ONE futures contract with as little as $2500 or 2) traded 425 shares of the DIA with $56k of capital required.

Keep in mind that with that leverage that it can work against as quickly as it can make you money.

For this trade - we are above 50 SMA, but with a shooting star type candle pattern. That's a concern. I would have liked to see a strong close above that SMA to feel good about this long. At the least, stops should be placed near the bottom of this shooting star and possibly consider a short if price trades through the low of that candle. We could see a channel type pattern going on here - bouncing back and forth. There's money to be made though, no doubt.