7.31.2012 New York Judas Example

The following is meant to serve as a narrative to review in the future.

Bias is bullish on the cable which is, in general, trading stronger than the fiber.  We had traded down last week to significant resistance and had a huge pop of 200+ pips on Thursday and Friday.  This move lined up  nicely with seasonal tendencies and COT data.

I expected accumulation on Monday and the low of the week to be made by Tuesday's London Open.  Upside objectives could reach to the 1.5900-1.6000 based on the OTE from the big swing down in May and swing projections.

On Monday we trade down during London and New York and then bounce.  I set a price alarm for the 62% retracement and 5700 figure.  Alarm sounds right at 2:00AM.  Have SMT and USDx divergence.  I enter long at 5693.  I should have waited for a bigger OTE to form.  I think I used something like a 14 pip swing which really isn't big enough.  Price trades up about 5710 but then comes back down.  Something just wasn't right so I got out for a small loss.

Turns out the Judas down is going to be quite a bit lower for the day.  5624 to be exact.  The whole time I'm watching price action on the cable fall the fiber is not really budging.  And USDx divergence remains.

This is what SMT divergence looks like.

Line chart.  Light blue is cable and green is fiber.

Regular chart.  Note how price is falling on the left (cable) but not on the right (fiber).  Since I have a bullish bias I'm thinking the move down on the cable is bank engineered.

To help confirm that the move on the cable is being engineered I look to USDx divergence.  Note how the purple line representing cable price is making a huge dip while the USDx red line refuses to go higher.  A big clue that the cable's price drop is a Judas swing.

So this is the question:  At what point do I enter long?  Obviously the 5700 level was blown out in London open.  OTE from previous day swing was blown out.  So I switched gears to higher time frame support and entered long at 5670 as a turtle soup entry but that was blown out (I managed to get out at break even before it fell further).

So finally I go back to what I have written previously.  I will wait for it to bounce 20-30 pips at least and hope for a OTE retrace.  Of course that doesn't happen today.  It did retrace 15 pips and retrace to the 62% level.

So back to my question.  How do you enter long in a situation like this?  I did note the 5650, 5637, and 5625 as levels price reacted to in the last month.

ADR was at 5642.  S2 at 5632.  Maybe there is just enough confluences with S2 etc. to go long but that is where I have been burned in the past.  Next time I will be willing to use confluences of price events like daily pivots to enter.  Also time of day is something to be considered.  Seems like the day's "battery" is winding down at this time and the likelihood of further decline is minimal.

7.24.2012 Trade Example

Here could have been an interesting trade that I missed.

On the left is the cable and the right is fiber.  Cable runs up during NYO acting as a Judas swing.  Note how the run during New York takes out Asian and London highs for the cable but fiber refuses to go as high.

Both hit the CPP.  Cable hits the 5550 figure and drops 29 pips in about 30 minutes.  The 5550 figure was an important support level last week.  Support turned resistance.

Finally, and most important to answering the question of when the Judas is going to stop, after dropping price retraces perfectly to an OTE level.

For confirmation there was some slight A/D divergence and USDx divergence.

Or you could have just traded this as the fiber was the weaker pair.

7.19.2012 Update

Fiber has, so far, traded back up to 2288.  That would be 53 pips.

Cable's high for the day is 5736.  That would have been 141 pips from my entry yesterday.

I'm close.

7.19.2012 Fiber Trade Review

Bullish bias right now.  Would rather trade the cable as it is the stronger of the two pair but today the fiber gave a New York open OTE that lined up with HTF support and with SMT divergence so I entered at 1.5% risk at 2290.

Price moves up almost 20 pips in my favor but then retraces with some crazy volatility.  I don't know if I ever saw my broker feed jump price around like I saw today.  I put my stop to break even because something just didn't seem right and price eventually hits it.

Price continues to drive down while USDx doesn't move at all and cable moves very little.  Huge clue that this is just a stop drive by the banks.  I look for where I think stops would be resting and decide on the 2260 level.  This would take out stops on the daily low and confluence with today's central pivot point.

Price comes down and hits my limit order to go long and ends up going all the way down to 2227 with my stop at 2230.  This level is an OTE from PDL to current week high along with weekly low to high.  With the huge USDx divergence I go long again at 2235 and take the entire position off at 2265 to mitigate the earlier loss.

I tried to enter on a turtle soup type entry.  I would have been better off waiting for a bounce.  I would have watched it trade down to 2227 and bounce up nearly 20 pips.  I could have bought on the small retrace you see on the chart.  I'm betting it will trade at least to the 2300 figure and long term higher.

7.19.2012

Stopped out today on the fiber for a 1.5% loss.

UPDATE:  That loss was erased.  Back to a small profit for the week.

7.18.2012 Comparison

So here is an example of how I was looking at the market and how I should have been.

First, lets review how I was trading in the last month or so.  I would have woke up and checked out a 15 minute chart and saw this.  The blue lines are higher time frame support and resistance lines, or where price has had significant reactions in the past.  I would have seen that price traded up to resistance and then traded down.

This looks similar to the London open sell template (copyright to Michael Huddleston).

The gray box in the chart above represents London open.  My thought would have been to wait for a retrace during New York and try to get in to the move of the day.  

This trade would have worked fine in a trending market and when the direction of the day is in line with the higher time frame trend.  Since we are bullish right now and this is a sell I looked at it differently when I got up.  Also, even though it fits the template I did not ignore the fact that it was trading in to resistance (even though it had not reached ADR for the day).

Here is how I saw it.

Price moves against the higher time frame direction hit resistance and comes down and hits support at the 5580 level.  Price jumps up around 30 pips and then retraces in to an OTE.  I actually went long at 5595.  However, after sitting through the mud all through the New York open I closed at break even.  This is fine as I was only thinking about demo trading this week anyway to make sure I was in sync with the market.  

More importantly my analysis was right.  The high of the day so far is 5654.  I had planned on taking 1/3 off at 5530 and letting the rest run as a position trade.  Possibly the 1.600 figure.

Week of July 15 2012

After lengthy study last week and weekend I believe the problem with my trading lately lies in that I am not really trading how I think, or claim to trade.  My entire trading plan involves waiting for when price gets to a specific support or resistance level and looking for a reaction and then using tools to confirm price action.

Instead I was waking up and looking at smaller time frames (15 minutes) and trying to fit price action in to a trending template without really using the levels I was drawing on the higher time frame charts.

That being said here are the levels I will watch this week.

One thing that I knew but has been cemented in my brain the last four weeks is that Monday's are a good day to sit on the sidelines and just watch price action.

July

July market is chewing me up and spitting me out.  Am going to take the rest of the week off to reset.  Good lessons being learned on trading during trending months (trades like the NY open retrace work) and non-trending months (trades like the NY open retrace do NOT work).

I think I will scale back trading for the rest of the month looking for one shot one kill type trades each week. August in to September should present us with good trending opportunities to (hopefully) get back on track and mitigate these losses.

7.3.2012

Yesterday I continued the pattern of a loss and then a win for a break even day.

Today I went short on the cable at 1.5680.  I do not like trading against the 4hr market flow but thought I could scalp 30 pips thinking it would trade down to 1.5650 level.  Price went against me for 15 pips and an OTE on the entire swing of the day (I entered on an OTE of a smaller swing made this morning).

Price crashes down and before it hits the 50 level I see fiber racing up.  This was only a 1% risk trade anyway so I just closed it out for a $178 profit.

Could have possibly doubled profit if I had waited for an OTE for the entire swing.

This is going to be a slow week with tomorrow being the 4th and Friday is non-farm payroll.