ES (TA) & Reply to Comment (On My Exit Strategy)

Just something I do now and then whenever I'm no longer clear about the prevailing trend: TA!!

Chart shows a Cup With Handle formation - a valid one, given that
1) ES went up 30 points prior to its formation,
2) Cup's relatively tall
3) Handle's found in the upper half of the cup

This is a cup that has clearly performed. Price hit a target that exceeded the measured rule used for a cup in a BULL market (in a bear market, the measured rule is to take HALF the height of the low of the cup to the right rim, then add it to the right rim).

I spotted several cups before this cup, and none hit the measured rule for an uptrend. This is the first one that did. I'm not sure if that means we're looking at the start of a bull market. I find it rather hard to believe. It doesn't gel with what I see on SPX monthly ( 3 strong bullish candle off price low, but a 2nd entry is usually required to reverse prcie back up given the very strong downward momentum before it).

So, this is my hypothesis (gotta have one, it's just me): granted that we could very well be looking at an intermediate uptrend ahead, market is due for correction. SPX doesn't have to go all the way back down to 666; we have support at 840 (best case scenario). I'm anticipating a Cup Pullback to around 930 (1st target for shorts). From there another cup or any other variations of "W" formation could take shape, but I'll expect all upward breakouts from such patterns to fail. I'll start looking out for inverted cups in fact, or any variations of "M"s.

Whenever I'm disciplined (rare, but I do get into that mode at least a few days in a month..), I will not take trades based on assumptions. When I say I anticipate something, it simply means I'll keep a lookout for a setups that suggest it's happening. I will need both setups and signals for me to want to take a trade.

Personally, I wish that the market will just continue to go up from this point on to look for 1000. I'm starting to NOT like to sell. In fact, I don't think I'll be selling even if the market were to go into a short-term downtrend. What's good about taking the daytrading/scalping route is that I can still BUY in a bull correction. Ha.

Daytrader 233:

You asked how I decide where to cover/exit my positions.

Briefly, I count the number of legs/push ups (since I BUY, predominantly) once price leaves the "W" base.

Whenever ES is at the low of a "W" formation just minutes prior to US market open, I'll look out for the first bear attempt to push price back down the base - it's easy to see: the first candle that has a low that's sligthly below the low of the previous candle (keeping in mind that market's in an upward swing).

Then I'll see what the next candle is. If it's a bullish candle that has a decent size body and NOT too big a range, I'll enter on close of this candle. If the first bear attempt turned out to be a hammer, I won't wait for the next candle to form. That hammer will become my signal candle.

Once I'm in trade, I keep an eye on both the tape and the candle. If the candle's exceptionally long, and if it's pierced a trendline or a resistance, I'll exit before the close of the candle. Otherwise, I'll hold for another candle. There's no particular reason - just that I've seen so many moves comprising 3 with-trend candles. I usually like to get out when many are still wanting in (easy to cover), so I'll usually pass the 3rd candle. On days where candles are relatively small (on both choppy and ranging days), I will exit on the 2nd push up.

Having said all that, I usually go with the tape. Some days I choose to ignore the tape and that's the only time I'll exit as planned. Tape helps to give me a high winning percentage with small wins each time and if I have a daily target to hit, it means multiple entries. I ditch the tape (for exits) when I'm not in the mood to get in and out a dozen times. I always use the tape to confirm my entries.

Hope I answered your question?