[DbPhoenix]

Drove right thru all of that down to support at the 42 level. Tacking on today's activity to yesterday's chart and extending the support line, price hit it right on the money (see yesterday's chart, above, for the original):

[DbPhoenix]

And then we hit resistance at 60:





See how this works? Support and resistance. Basic.


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[DbPhoenix]

Originally Posted by DbPhoenix »

See how this works? Support and resistance. Basic.

But not guaranteed. As it turns out, this trade wasn't finished. But that's the way it is with real-time trading (as opposed to Here's A Trade From Yesterday).

So what happened? Price dropped from 62 down to 56, then decided it didn't want to go any further. Apparently it wasn't finished with its business. But does this mean the trade should not have been taken? It was at R. And there was a divergence. So there's little justification for not taking it, unless one didn't and then tried to rationalize not taking it.

But those who are the least bit interested in this should understand that these divergences, at resistance, will almost always provide enough propellant to move price away from the entry price (unless one just sits there like a deer in headlights and enters way too late) and get the trader at least to a breakeven point.

This particular trade illustrates the fact, however, that one can't stop thinking or observing just because he's in. This isn't the end; it's only the beginning. If price doesn't do what he expects it to do, he'd better figure out why and figure it out fast.

So let's return to the charts and see where we are. See that little red arrow? That's where we are right now, just having hit 60.5:

Now look at the next bar. This is where we're going next:

Now what's that all about? And where is price going now? Should the trader be thinking about going long (even though the long train left the station back at 43.5; see earlier chart, above)? Or was he just early on the short? Is this another opportunity?

When you don't know what's going on, and price appears to be taking off for parts unknown, look left. Try to find whatever resistance level you missed that may now be providing you with that next opportunity.

Here. Look left. See that trading range from yesterday?

You didn't think it amounted to much, but Surprise! Now draw a line from the top of that little bitty pissant trading range forward:

Now waddaya know about that? And here's what the tick chart looks like at that point:

Now this takes a bit of flexibility. Yes, there is a divergence here, but it is a low-grade one. And, yes, it is doing all this at the R provided (maybe) by the upper limit of that trading range. What may provide the deciding factor here is not that price gets up to that level but how it does so. Note how fast it climbs. Notice how little time it spends at each level on its way up. Note how it barely prints at the top. Then note how the TQ plunges while price is still waffling around near the top, trying to decide what to do.

There is no one element that says Short Me. It's all of it. And even then, one is free to place a buystop above all of this and a sellstop below, then let price do whatever it pleases.

Wrapping this up, we see that price tested this very same level yet again later this afternoon. If you're still around and up to it, there's another short opportunity here.

First the context:

And the TQ, with that very same line:

Ain't resistance and support wonderful things?

But that should be enough. This isn't exceptionally difficult. No new jargon to memorize. Nothing to label. Not many lines to draw. Just support and resistance and how price behaves if and when it gets there. Those who are interested should play with this. Those who do are welcome to use this thread to post the results of their play.

Those who are mystified by support and resistance can look over the Nature of Support and Resistance thread and/or the Cajas thread. Those who don't want to wade through all that can check the Most Thanked Posts stickie and read only what was considered "best".

.

[DbPhoenix]

Just a note to point out that premkt activity highlights 62 yet again as the price level to pay close attention to.

[BlowFish]

Originally Posted by DbPhoenix »

I'm a bit surprised at the response to these posts. Clearly some need is being met, though I'm not sure that that need is.

They are pretty compelling charts I have not had market internals on my charts for ages these make me think I should.

[thetatrader]

Dp nice charts. I use the tick a little differently. I throw 20 Bar moving average on them and I take all with trend trades with a +-250 tick avg. and I won't take any counter trend trades if over under that. ocastional I will throw a trend line on them, I don't know why some kind of six since. But when I am looking for a break in trend and see the tick is lop sided it make since. all an all the tick just keeps me out of trouble. Note I only peak at the tick (1min. nyse) 2 to 3 times a day. And note I am working not to looking at them at all. but Its like crack or something. I am like just let me peak and see what the tick is doing. not that I do crack (but did quite smoking a few years back, that was hell).

[jay bird]

A couple of setups that I saw using the tick today. My rules concerning the tick are basically if price is trending and the tick is hitting extremes then I only take with trend setups until the trendline is broken and there has been a test of the previous price extreme. If the market is ranging then I look for divergences at S/R.

[DbPhoenix]

Originally Posted by jay bird »

A couple of setups that I saw using the tick today. My rules concerning the tick are basically if price is trending and the tick is hitting extremes then I only take with trend setups until the trendline is broken and there has been a test of the previous price extreme. If the market is ranging then I look for divergences at S/R.

That's pretty much what I presented here yesterday, only without the TICK overlay. As you say, all you have to do is ride the trend.

Thanks for the contribution.

Colorful.