Tuesday, April 20, 2010

Finding an Exit take 2

Well, I missed my exit spot on Friday stuck with work crisis and didn't get out when I saw the bullish divergence and the 3 wave low. After the fact I'm looking to still exit based on the same criteria. I notice some interesting Pre-channels that have stopped the momentum up today.

I expect a retrace back to the fib lines of the last run 1195~ish range after today or tomorrow's high. I'm going to keep a close look (if I can be at the computer tomorrow) at the battle at the fibs and if that trendline breaks. Best case senario is that we get very bearish impulse waves which i'm not holding my breath for. It may take some time for this to roll over with new high's along the way and maybe even past 1213 high as well, but keep an eye on bearish divergence to hold true.

Monday, April 19, 2010

Broken Support Backtest vs. Support Trend

Here is a chart update of the 60 minute chart. The structure down IMHO is that of an A,B,C down ending mid day today with a retrace up to our current levels that can go as far as 1202~ish for a "B" wave up here. As you can see in the chart below, the support trend was broken and looks to be retested. The flatter support tend still seems to be held today as well. This looks like a very solid EWP structure and the turns are right at critical trends. I'm keeping an eye on these trends very closely. The Daily is at key support zones on the indicators as well. CCI(20) near 50, RSI near 60. This is whipsaw territory, so I'm keeping my short position with extreme caution here. I could of sold at the 1183 bottom, clear bullish divergence and a solid count down to make a full correction of the entire down movment structure. Were in the fib battle zone to define the next large move. I'm in high risk here knowing the 1183 trend break with bullish divergence was a pivot point. I need to get out of my short as a rule to the system (divergence break on the daily) and I'm still trying to get out with the least amount of damage. I'm not convinced that don't get another leg down here pushing well below 1180 making the trade break-even at that point (and no that is not why i'm holding, that's the biggest mistake traders hold positions). The risk/reward is the we get a "C" or "3" down here which is the real payday of a trade weathing the "A/1" and "B/2" madness. I'm expecting to see very impulsive waves down here and will exit if we don't establish a new powerful down trend. (note "b" wave here i'm counting 3-3-5 and should soon end based on the fib's.)

Friday, April 16, 2010

Finding the exit - Take 1

Bearish confirmation from the 30/60 ended up being true and we have a decent sized correction failing at the "bear test 3". Now that I have sell confermation from the daily chart. I am exacting an exit by moving my charts of 3's from (30/60/daily) to (15/30/60). I mainly tested this system off the (1,5,10 minute) charts so the idea of exacting a losing trade by moving down in time-frame never entered my mind. I'm looking for trend break with bullish divergence to exit my losing position here. The real test is the down trend break vs. the longer-term support trend line. Were currently in the bear/bull argument of a completed "C" wave or were in 4'th wave of "C" or simply wave 3(the most bearish count with real trend change). I'm in the mind set of 4'th wave. Here is an updated 30 minute chart.

Thursday, April 15, 2010

Change in plans. On Exit now of short position, just when do I exit it?

Ok, for the last week have have been posting charts on the daily. You can see the live chart to the link of my public charts to the right. Well, today broke my definition of a "bearish divergence". I went to the 30 and 60 minute chart and they both look extremely bearish to me. With my real trade I think i'm going to keep a close eye on the 30/60 charts and will exit out of my short position with least amount of damage I can at this point. I expect a drop in all 3 charts, yet without the confimation of bearish divergence on the daily I expect that we will get a correction here and then continue bearish divergence from the last high today from the daily moving up to the 1230~ish range if the we have convincing breaks in trends. Here is a look at the 30 minute chart and a trade set-up for RSI you can find here "Swing Failure"  60 minute chart below that. If you look at the RSI on the 60 minute. I consider that an safe exit point now unless I do not see bullish divergence anywhere when we are near that area on RSI.

I would love your feedback on what i've decided to do here. Your openions and comments are appreciated!

Wednesday, April 14, 2010

Repeat of 1180 & 1150 tops

Once again we are overbought on charts from 1/5/10/15/30/60 minutes, daily, weekly charts like we were back at the 1180 & 1150 tops. 1180 didn't work out as great and i'm still bearly holding on to the short position I have from 1180. 3rd time a charm? This is at 11:45 PST on 4/14/2010. We just need this tight trend to break to get any short momentum going. All news is great and were reaching a top of the "good" feeling of the market.

Monday, April 12, 2010

Still in there. Holding short and down almost 20 points.

Man trading on the daily, 60/30 minute charts in 3's is just brutal. As you can see in the chart below, CCI broke to new hight (breaking bearish divergence) While STO/RSI/MACD/ADX(+DI) are still showing bearish divergence. We hit the top of that triangle formation. 1220 I was expecting to hit before the major 666- now correction takes place, but I was expecting a "b" pull back from the 1044 to 1999 run.

Friday, April 9, 2010

Micro Count Update

Are we in a trend change or 4? I vote trend change!

The Ever Lasting Triangle!

(Updated count = Last chart) Looks like the bulls are getting every last drop of this triangle they can. Very dangerous to be long here in my openion. I had to change the counts to accomidate the new high today. We still have a little room left for up movement to hit the top of the triangle, but not much. Indicators are still showing solid bearish divergence so the short position is still safe even though i'm now down almost 4% from the SPXU trade. When this tight channel does break I will get that back very fast. This trade is not working out as I hoped but is still in-line to the hold of a losing trade. I'm a firm believer that stops, though very safe, will often make you exit when you shouldn't. The only way to use a stop in my system is to guess what number would force a break in bearish divergence and that is hard to do. If it moves up fast indicators will break the divergence where if it creeps up it will not. Here is a look at the daily and how crazy this last run really is. Bulls are playing with fire here.

Here is a zoom into the last high with a micro count. It's funny this is almost exactly the same formation that I was playing out in a worst-case senario winning trade playing off of divergence break that never happens. I will post that chart after this one.

and here is my test chart that I have been working on.

Updated Count

Thursday, April 8, 2010

Count Change

After some pondering and watching how the market, I have changed my count that is is an impulsive wave up and i'm not sure if this top is "Z" or just an "A". I do think we have an equal chance to head back up to test the 1220 fib. line as "Z" is completed. As we head up in P[2] it's corrective so I studied my 1 year chart and started moving closer. So here is my largest time-frame out of the 3 i'm trading which is the daily.

Here is the second lower time-frame 60 minute with my idea of how this trade will pan out if the trade is not broken with a break in bearish divergence off the daily.

Here is the lowest time-level chart the 30-minute chart.

Mid-day update

Possible backtest of broken support trend channel.

Chart of the day

From the 3 charts that i'm trading. (daily, 30/60 minutes) Here is a look at the 30 minute chart and the key level to get this trend change going is the 1175 trend channel break. It took a hard stab at that today giving the bulls a little scare, but was fought off. From the 30 minute chart you can see oversold conditions which the 60 minute and daily are not. My trade is now in the hands of forcing whipsaws on the 30 minute chart so that the 60 minute and daily can become eith neutral or oversold as well to leave the position. We have a solid 5 wave count down from the high so I expect the 30 minute chart to get either neutral to overbought but they key to makeing this trade work is that the the current oversold condition is greater than the next advance up keeping the bearish view still in play.

Wednesday, April 7, 2010

What to expect for today/tomorrow

Topping process to me seems to be so tasking where bottoms are very sharp. The market has to roll over and make little bumps testing the convictions of the bear. As I ponder the meaning of life... I mean the process of the topping madness. It has made my convictions of the broken divergence even stronger and why not to make any stops in a trade rather baby-sit the trade and exit based on the divergence break. For me that is like taking out the chatter of the small noises of the market and listen to the true conviction of the market movers. Here is where we are today (see chart below) where at a point where bearish divergence was almost broken yet not enough to break it. In a bear play, your profits are very fast but you have to hold through the topping process that can drive you crazy. This trade system "Divergence Trade of 3's" takes this topping process to an exact rule to when to losing trade... (well in the process, still have some exact rules to define here). Nonetheless, in every move forward or down a new smaller battle exits to decide the next move down. I believe were living in the 1-15 minute charts now and we have not strong bearish convictions left until we take down this Bullish trend channel from the 30/60 minute charts. So, here ya go here is out baby-step battle today/tomorrow. Daily chart is still showing bearish divergence so the short trade is still in play.

Tuesday, April 6, 2010

Don't Panc part 3!!!

Well it's getting very close to breaking the bearish divergence but has not yet. Take a look at the daily chart below and see that were almost reaching the last highs of the CCI and RSI.  ADX is mixed with a decrease in both +DI and -DI. MACD is still showing clear bearish divergence so I hold true to short position.

Monday, April 5, 2010

Don't Panic continued.

Update on the daily chart. Bearish divergence is still in tact with new high. The short-term bearish divergence trend broke on some of the indicators (such as CCI), but overall it is still ok. I expect come corrections coming with possible new highs while the bearish divergence is held in place. This is why I disklike trading off the daily, 60/30 minute charts, It can hold bearish divergence for a very long time. You must be patient, From my entry @1180 i'm down only 7 points.

Thursday, April 1, 2010

Don't Panic

I'm glad that we got a new high so it will force me to focus on the most unclear aspect of the Divergence Trade of 3's. This is the exit of a losing position. I'm 100% set on the exit is based on the break of bearish divergence (in this case of a short position). The hardest thing to break down is it a break in the trend of the divergence in (3?) indicators or a break as in a new high of the indicators based on the new high of the market? I think it's more of a risk play than an exact rule. I would say a break in trend is lower risk and a break in new high/low is higher risk. This brings another factor to the complexity in developing a strategy is that now, I need to either define it as a high/low risk system or incorperate both high and low risk into it. I'm preferring the latter at this point, but that means more work. So, lets take a closer look of the 3 time-frame charts i'm trading off of. 30,60,daily. Here is the 30-minute chart. and you can clearly see the break in the trend of bearish divergence is being tested but has not broken on any indicators. (You must read the next chart to understand "daily" to understand this. Do not just look at the 30-minute)

Now here is a look at the daily chart. I have already set the rule in play that the exit is "break in divergence" exit must be on the longest-term chart of the 3 your trading. If you notice, we have lots more room on the daily for even more up before the breaks in divergence occur. One thing to look at is the CCI(20). Notice on the daily you see clear bearish divergence yet on the 30-minute it's breaking the high of the last CCI(20). This is where CCI often lies and the rule of exiting off the longest-term chart is a rule.