I was asked how I would deal with the other resistances below 742.
I haven't been able to explain that. I suck at explaining anything.
So, what I'm going to do is to show exactly how I plan for my trade/s on a typical trading day.
The first thing I do before I even look at my ER2 chart is to see how the market has done yesterday and the days before, and if I can, find out WHY the market is behaving the way it's behaving.
Knowing the whys gives me a better sense of whether a trend will last. Knowing the whys these days tells me whether YESTERDAY's trend will last (nowadays, you just can't think beyond 1 day's trend), and who (bulls or bears) will be the jittery one today should price fail to hit a support or resistance.
In a climate where no one knows for sure where the market is heading, and where most players are opportunists taking a ride hopefully on the right side, what we are all playing is just FEAR. What I have learnt so far about an uptrend is that it is motivated by HOPE and GREED and a downtrend is fueled by FEAR. But these days, a decidedly strong upward move could be one that's driven by fear too -frightened bears covering.
As far as ER2 is concerned, you seldom see ranging sessions these days. They are either strong trending days or CHAOTIC sessions that give you fake breakouts and NO PATTERNS. These are all signs of extreme sentiments to me. Everyone's jumping in when they see an opportunity, and fleeing when it looks like the party is going to be over sooner than they thought.
Did I digress again??
Anyway, an example of the things I look at before I study my 30min chart for intraday trade has been documented in my previous post.
Now, my 30-min chart.
This is the zoomed out view of my 30-min chart (click on chart for enlarged view), which I use to find key support and resistance lines:
First, I look for the lines that I think are the ones that the bears and the bulls will be hoping to see breached. And if these lines are not hit, you'll get a trend in the first (sometimes longer, maybe til 11am) hour of the trading session (On some days, I simply can't find a line that I can work with and that's usually when there's nothing much happening in a market that's going nowhere in the first place...).
For today, I do have something to work with: a rally on Monday on ONE SINGLE piece of news that has so far not exactly been well-received (except by those who bought of course), and a Tuesday where almost all the gains on Monday were lost.
So, my question at this point would be this: was that just profit taking, or frantic offloading (afterall, and I'm refering to just ER2, yesterday's session failed to reach the high of Monday's session, and this is not exactly the sign of a healthy uptrend)? If it's the former, will price continue its upward move following Monday's gain?
At this point, I take a look at Monday's price movement. Not at all bullish. The gains were from the gap. After that was DOWN almost all the way, followed by bears taking profit and covering (maybe even some new buying??) in the later part of the day.
So, now, I really have no reason to think that the market is optimistic.
But on a day when everything's so grim, bottom fishers would start coming in, won't they?
So, there you go - my thoughts all in a jumble again.
I go back to my chart to seek some solace.
I look for the first resistance that I think would discourage the bulls if it's not broken. That would be the support from Monday's session. 722.35 (in lilac - my favorite color - dotted line on my chart).
Then I look for the first support that I think would send the bears covering if it's not breached. Yesterday's low. 707 (in brown dotted line on my chart).
As far as I'm concerned, I don't care about all the other support and resistance between them. By a certain time, if either one of them has been tested but not breached, that will give me a rough idea of who's going to be running for cover.
On some days, the lines are not tested at all before market opens. That's when I don't get an entry pre-market. Those are the days I play by ear and SCALP.
Back to today. On my charts there are lines below and above my lilac and brown dotted lines. Those are my DREAM profit-targets. When looking for these lines, I look at where ER2 will likely hit by the end of the trading session. The support and resistance lines that will hold are the ones that have never been tested before or tested just once or twice. I look for those lines. But if they are too near (ER2's range is hardly less than 10 points per day), I look for the next line above when I'm looking for resistance, and the next line below when I'm looking for support.
For today, I'm bearish. So I'll be expecting ER2 to test 722. If it does, and test it several times before 830, I'll enter short and set my stop loss a few ticks above 722. My profit target will be 712 (Sep 4's low, which I think is likely to be where it will pause before making the next move). That's a 10 point move. If I get in with 2 contracts, I'll let my 2nd one run and set my profit target at 707 (yesterday's low).
On scalping days, I look at 5-min chart (I use 1 min chart to make sure I'm not shorting when price is moving up) and use Fib for resistance and support.
So, as far as I'm concern, all the other support and resistance lines on all the other time frames except the 30-min's are invisible to me.
For now, ER2 is trading in a range between 712 and 719. If it goes up and doesn't break above 719, it will mean that it's another scalping day for me (not entering coz 722 will be at the back of my mind. It's a line that remains to be tested).
HOW I SCALP THE ER2
The above is the correct chart for Sep 10.
The one shown in my posting yesterday was the chart for Sep 9's trading.
So, I ended up making 3 scalps yesterday because I didn't want to take a pre-market entry at 718 (a 4-point risk, since I expected 722.35 to be tested SOMETIME in the day and I had no idea when that'll be).
718 became resistance for the day. ER2 did go up to just touch 722 before coming back down again, finding support at around 715 at market close.
On non-trending days, I keep a lookout for patterns like double and triple tops and bottoms (tops mostly of course, since I'm bearish).
On a day that starts choppy, I focus on the 1min-chart, only stealing glances at the 5min now and then.
The 5min chart on such days totally stumps me. At about 10:40am EST yesterday, I was finally able to see a triple top taking shape. In general though, the 5min charts are NOT friendly on a day like yesterday.
Best to use the 1min.
On trending days, I use fib for entry on the 5min chart. I'll wait for the first wave to be formed (on days that I don't get an entry by 8:30am EST). When it retraces (on a down day, the first bullish candle is a sign), I draw a fib retracement. ER2 usually retraces to fib 38.2% - so that is where I draw my resistance (again, I'm referring to a down day).
I do not take a trade at the resistance though. The resistance is simply the price that I think ER2 will retrace to. If the next candle move above that line, I'll expect it to retrace to 50% or even to 61.8%.
ER2 will usually consolidate within the area bound by where it stops going down and the resistance level - with 3 to 4 short body candles. I will go in when it moves out of this range (that is, if ER2 retraces by only 38.2%. If it retraces beyond that to 50% or 61.8%, it usually will go up in channels of ABC corrective waves, and form tops and bottoms and mountains and valleys, on its way down. That will be a topic for another day)
Sometimes it goes back up a little before falling by 3 to 5 points. It's a chance that I have to take.
Sometimes I wait for a bearish candle to close below that range first. Sometimes I don't. It depends on how nervous I feel the market is.
On a lazy down day, I take my time, coz on these days, ER2 could retrace to 50% and I don't want to take that ride UP.
On a nervous sell-off day, everything happens fast and I go in when I see the chance.
I exit when price starts plunging. My target is usually around 1 to 2 points. So far, I've found it hard to hold for 2 points. The ER2 is predictable only IN RETROSPECT. Ironic. But true.
I find it easier to just take profits off the table whenever I can in a market like this. This is simply not a time to go in for a killing, for me personally. I could end up getting killed.
I'm making fewer trades now than before, because I don't have to make up for losing trades (which usually were winning trades that turned into a loss while I waited for my 2-point gain).
And I don't run as quickly as I used to. Now I wait for market to do what it has to do before giving me the plunge that I'm waiting for.
The challenge is in knowing when waiting in confidence becomes HOPING.
Knowing what the general market sentiment is (for the day and the past few days) helps here. In a generally uncertain market like the one we're seeing since the beginning of this week, the likelihood that price will go south is higher than the converse. Which is why I still can't make myself BUY.
But I'm always anticipating a crazy up day, hence I watch up for signs that ER2 is turning up.
The line that I set for the day on my 30-min chart, the line that makes bulls run - that's my POINT OF NO RETURN.
If I decide to hold any trade, and ER2 hits that point, and stays up, I'll exit. It's not happened yet. That day will have to be a day that offers a very attractive potential reward for me to want to take that risk.
The one shown in my posting yesterday was the chart for Sep 9's trading.
So, I ended up making 3 scalps yesterday because I didn't want to take a pre-market entry at 718 (a 4-point risk, since I expected 722.35 to be tested SOMETIME in the day and I had no idea when that'll be).
718 became resistance for the day. ER2 did go up to just touch 722 before coming back down again, finding support at around 715 at market close.
On non-trending days, I keep a lookout for patterns like double and triple tops and bottoms (tops mostly of course, since I'm bearish).
On a day that starts choppy, I focus on the 1min-chart, only stealing glances at the 5min now and then.
The 5min chart on such days totally stumps me. At about 10:40am EST yesterday, I was finally able to see a triple top taking shape. In general though, the 5min charts are NOT friendly on a day like yesterday.
Best to use the 1min.
On trending days, I use fib for entry on the 5min chart. I'll wait for the first wave to be formed (on days that I don't get an entry by 8:30am EST). When it retraces (on a down day, the first bullish candle is a sign), I draw a fib retracement. ER2 usually retraces to fib 38.2% - so that is where I draw my resistance (again, I'm referring to a down day).
I do not take a trade at the resistance though. The resistance is simply the price that I think ER2 will retrace to. If the next candle move above that line, I'll expect it to retrace to 50% or even to 61.8%.
ER2 will usually consolidate within the area bound by where it stops going down and the resistance level - with 3 to 4 short body candles. I will go in when it moves out of this range (that is, if ER2 retraces by only 38.2%. If it retraces beyond that to 50% or 61.8%, it usually will go up in channels of ABC corrective waves, and form tops and bottoms and mountains and valleys, on its way down. That will be a topic for another day)
Sometimes it goes back up a little before falling by 3 to 5 points. It's a chance that I have to take.
Sometimes I wait for a bearish candle to close below that range first. Sometimes I don't. It depends on how nervous I feel the market is.
On a lazy down day, I take my time, coz on these days, ER2 could retrace to 50% and I don't want to take that ride UP.
On a nervous sell-off day, everything happens fast and I go in when I see the chance.
I exit when price starts plunging. My target is usually around 1 to 2 points. So far, I've found it hard to hold for 2 points. The ER2 is predictable only IN RETROSPECT. Ironic. But true.
I find it easier to just take profits off the table whenever I can in a market like this. This is simply not a time to go in for a killing, for me personally. I could end up getting killed.
I'm making fewer trades now than before, because I don't have to make up for losing trades (which usually were winning trades that turned into a loss while I waited for my 2-point gain).
And I don't run as quickly as I used to. Now I wait for market to do what it has to do before giving me the plunge that I'm waiting for.
The challenge is in knowing when waiting in confidence becomes HOPING.
Knowing what the general market sentiment is (for the day and the past few days) helps here. In a generally uncertain market like the one we're seeing since the beginning of this week, the likelihood that price will go south is higher than the converse. Which is why I still can't make myself BUY.
But I'm always anticipating a crazy up day, hence I watch up for signs that ER2 is turning up.
The line that I set for the day on my 30-min chart, the line that makes bulls run - that's my POINT OF NO RETURN.
If I decide to hold any trade, and ER2 hits that point, and stays up, I'll exit. It's not happened yet. That day will have to be a day that offers a very attractive potential reward for me to want to take that risk.
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