Sunday, February 22, 2009

Plan the trade, trade the plan and always know your "uncle point"

It is not so often I talk about particular trading strategies, it has always been difficult for me - I tend to follow my trades at all times (at least most of the time) and make trading decisions based on the most current market info.

I'd like to talk about how I see trading the bounce (if it will happen indeed) and use /ES as an example. If my "game plan" would be not be clear or overly vague - don't be too hard on me - as I mentioned many times before, I trade "gut feel" way more often than any technical indicators I ever used...

Down to business of talking...Obama has positive influence on me, I might start "talking" more - hope I will not start making dumber decisions.

Friday's low on /ES was around (that is right - "around" - I am not obsessed with precise numbers in stock market) 752.50.  First big grey box on daily chart is what I call "risk zone" (how I define is a topic for separate conversation).  739-795 low/high of that box.  After spending few weeks above risk zone, /ES penetrated it to downside, but volume did not support that move and without touching lower side (739) /ES put hammer-like candle on daily (with a little help of "propaganda machine" with nicely timed "news" at 1:10PM when effect of such news was destined to be amplified by "pre-existing technical conditions".

From now on multiple trading scenarios are possible (all prices are closing prices).
    /ES will go up with max upside target for this move at 866.
    down to the lower side of risk zone (which is less likely since Friday's candle low was not that far away from the bottom of risk zone)
    It will stall at the top of risk zone (795) for few days.
    last case is slightly more bearish - /ES goes down without stopping at 739, if that happen - next risk zone will be defined with lower side at about 727 (It is close to impossible to calculate this number before tomorrow's closing number, but it might be damn close)

Depending where and in what direction I will choose to trade /ES next few days - these scenarios/levels will provide me with "template" reactions - in this market none has enough time to calculate odds on the fly.

If "more bullish" scenarios will not materialize this week there is a possibility of heading down to 660 area during the next 2-3 weeks - HAVE AN EXIT PLAN NO MATTER WHAT. I still do think that February - beginning of March will put in a bottom for strong rally.


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