[WHY?]

Friday had been a strong up day and the first up day after a downswing. Monday was therefore a 'sell day' -- note this is very, very different than a 'sell short day'. don't confuse a 'sell day' with a 'sell short day'.


Monday you would expect the market to get marked up a bit so that smart money could then sell. The day was a holiday though (Columbus Day) and had low volume -- there was a gap down and it was a negative day. Thus, this was not consistent with Taylor but the day was inherently screwed up by the low-volume holiday. Note, Monday 'built lower value' than Friday. Thus we have a down day and the closing 'pinball reading' is 35. Note 'Pinball' is defined by Linda Rashke as the 3-period RSI of the 1 day change in price. Essentially, it is a calculation that, when low, shows that there is underlying momentum in the market --- consistent with Taylors comment about how in an uptrend, the low will often be made in 1-day.

While I am waiting on the chart I would like to make a few comments.

If Friday was a buy day as you have suggested then Taylor would have been flat by the end of the day. He would not have carried any longs over to Monday (the sell day). Allow me to quote from his book the reason why. (The Taylor Trading Technique p 33)

"On a buying day when the stock rallies from the low and the gain is sufficiently large, we sell out the same day."

"The reason we sell out on the same day, is that the stock may open down and often does from a run up of this kind or it may open at the previous close on the selling day and spend the whole selling day and not reach the selling day objective - the buying day high."

So if friday was a buy day on the chart then monday simply would not have hurt Taylor. He would have been flat on Friday - per his rules.

[WHY?]

Originally Posted by Reaver »

Thanks for taking the time to post all that info.

You are welcome. Perhaps I can contribute a little along. Taylor is an interesting character and his system is unique.

[WHY?]

well i guess the thread kicked the bucket.

[Dogpile]

I will try to keep it going.

Today was sell day and late Friday and overnight strength was sold aggressively this morning. Keeping the 'sell day' in mind kept you out of trouble today.

We have now built lower value 2 straight days. Despite Friday being an 'up close' -- price was 'accepted' lower by forming a PVP at 1570 vs Thursdays 1581.25 level.

Thus, we have 2 straight days of building lower value. Tomorrow is another 'pinball buy day'. Look for a test of the low to go long. Remember, this is just a guideline.

Realize that there is substantial volume from past days in the 1570.00 zone so a direct push up into that level could set up a short.

There are 2 key concepts with Taylor.
1) look for 'tests' of important pivots.
2) look for morning reversals on key days.

We 'tested' up out of 1570 late on Friday and onto Globex overnight. This test led to a morning reversal and a hard flush lower.

Tomorrow, I will potentially be looking for a morning reversal either on the test of todays low -- for a long-side trade --- or potentially looking for a morning reversal into 1570 resistance for a short-side trade. It just depends on the action but that would be my high-level thinking for now.

[WHY?]

Thanks for your post to keep this thread alive. I am not sure how you calculate what day it is (B, S, SS). I have a couple of ways I do it. One is strickly Taylor. The other is when there is an abberation in the market it "may" cause the day to change. I can't get into the details of it but what I have found interesting is that you end up on 10-15-07 calling for 10-16-07 to be a buy day. I ran both my calculations and I come up with both calculations saying it will be a short sell day on 10-16-07. My strategy for tomm would be to short. I would try to short near 1574 to 1576 or higher if market trades higher. I would be watching the tape for the entry point. However, I would only short it if that high is made within 2 hours of the open. I would then cover the same day on any decent decline. I would not go long tomm if tomm is an SS day.

[Dogpile]

<<The other is when there is an abberation in the market it "may" cause the day to change. I can't get into the details of it but what I have found interesting is that you end up on 10-15-07 calling for 10-16-07 to be a buy day. I ran both my calculations and I come up with both calculations saying it will be a short sell day on 10-16-07. My strategy for tomm would be to short. I would try to short near 1574 to 1576 or higher if market trades higher. >>

so you are looking to short 74-76? that is +15 pts vs the close. That is a long way up.

It is not really clean in terms of what it is Taylor-wise.

The pinball reading is low -- but we haven't had multiple up days in a row so its not a clean pinball buy day. The 2-ROC isn't real low due to Thursdays low-close. But we traded 65k contracts at 1581.25 on Thursday -- a significant amount -- and we have now flushed out many of those longs as we built value at 58.75 today, down -22.50 points lower than Thursdays value level and -35 pts high to low. A lot of volume built up in the low-mid 50's today and someone was buying down there. This sets us up for an up-auction attempt -- which may indeed fizzle.

Tomorrow could very well be a 'sell short day' -- but that might play out more in the afternoon anyway. Its option expiration week so maybe we get a roller coaster 'complex' day where we go lower, test way up and then close very low -- consistent with a sell-short day. No matter what it is though, I will just be watching my oscillators at key pivots and look to make a few low-risk points that way.

[WHY?]

so you are looking to short 74-76? that is +15 pts vs the close. That is a long way up.

Yes, I know it is however, it must make the high earlier in the session or I'll pass. I know with the low close it appears the low might be made first but you never know. I won't short it if it makes the target price in afternoon. It has to make it early in the session. BY noon at the very latest and preferably within 1.5 hours of the open.

It is not really clean in terms of what it is Taylor-wise.

Not exactly sure what you mean by this but I think alot of it depends on how each of us interprets Taylor.

The pinball reading is low -- but we haven't had multiple up days in a row so its not a clean pinball buy day. The 2-ROC isn't real low due to Thursdays low-close. But we traded 65k contracts at 1581.25 on Thursday -- a significant amount -- and we have now flushed out many of those longs as we built value at 58.75 today, down -22.50 points lower than Thursdays value level and -35 pts high to low. A lot of volume built up in the low-mid 50's today and someone was buying down there. This sets us up for an up-auction attempt -- which may indeed fizzle.

Taylor never had the pinball approach. However, if it is an adaptation to Taylor that enhances his methodology I see nothing wrong with that.

Tomorrow could very well be a 'sell short day' -- but the key is if a high or low is 'made first.'

While that is the ideal sometimes the pattern doesn't pan out. When it doesn't Taylor had rules in place to deal with the problem. Taylor for the most part didn't believe in changing the book up. He taught to always keep it in the same order B, S, SS days. Page 15 The Taylor Trading Technique "The book is always kept in this order, never change the continuity".

ON page 41 he discusses shorting a stock on a SS day. "We try to make all short sales on the high made first on penetrations of -selling day highs-This is the most favorable action for your play-we would not "put out" a short sale where the stock or future opened down and declined further, without a rally, for this action would carry the implications that rally, should it start later in the session, may cause the closing price to be up near the high of the day and this would make the high last on a short sale day, indicating a future rally." Three things can be deduced from this Taylor quote:

1) Not all short sell days trade up first. Some trade down first.
2) The ideal short sell day trades up first and is the most favorable play for shorting.
3) Do not short a high made last on a short sell day. Because that high made last indicates the trend as up

I see tommorrow as a short sell day. However, if it doesn't act like a short sell day, I pass. If it does then I know what I am looking for in terms of taking a trade. Taylor didn't allow taking a long position on an SS day. While I admit it looks like a good place to take a long position (with low close and trend heading up tomm) one might get away with it, this time, but the the next time get hammered. Taylor was about finding the one main trend and not riding the many cross-trends. I believe you have to watch the tape to determine your exact entry points. It is mechanical but it is also discretionary. I also find correlating volume with price useful in Taylors methodlogy. For instance, VSA can be useful in correlation with Taylor. I think you have done the some correlation in your pinball effect. Interesting!

[WHY?]

Another point I would make is that IF 10-16-07 is a SS day then 10-15 was a sell day and it also was a BV. That means it's low sold under the low of the previous session 10-12 (which was a buy day). So, a BV and a low close on 10-15 indicates a probable failure to penetrate the target price on 10-16. The target price would be the shorting point and it must be made early in the session. One could short the failure to penetrate IF it is made early in the session but would be risky to do so (because the decline could be arrested)and Taylor didn't recommend it. He would say wait to short on the next buy day on a high made first. The point is that the decline is likely to be arrested today 10-16. The day may end with a high close. If so, that would point to a high open on 10-17 (a new buy day) and be the better shorting opportunity. So, even though 10-16 is a SS day IF it doesn't pan out right it would be best to stand aside and not short so as to not get caught in the cross current.

If however, the decline continues and the close is on or near the low on 10-16 then we have an established downtrend and it could continue on down for more days causing more failures to penetrate the target prices. In such a case shorting would be limited to shorting on buy days only (even on failure to penetrate) and one would go long on the succesive BV's being made and selling out the longs at any pentration of the buy day lows instead of waiting for penetrations of the normal target price, which is the buy day high.