How I trade using multiple timeframes
As we come towards the end of the
summer doldrums end of August to Mid September, traders must be
extremely careful not to overtrade. Pacing is of utmost importance in this
market. The first 30 minutes of the market day usually has the highest playable
volume and then it’s pretty much all downhill after that. The last hour tends to
get a pick up in volume. The best filtered set ups are Perfect Storms in which
three or more time frames are forming converging pups or mini pups at the same
time.
Mini pups are when the lead %d stochastics stalls on the rise
as the laggard %dslow stochastics continues to rise to form a wedge like
breakout and vice versa on mini inverse pups.
This was the case when we played OIH short in the last hour on
8/28/06. Markets were relatively flat but the OIH was forming a nice
consolidation breakdown on the 3/8/13 minute charts. The ‘ace’ up the sleeve was
the 60 min charts which showed a 60 min 5 period ma breakdown at 136.67 sealing
the resistance there. The stochastics showed a mini inverse pup. This was the
KEY underlying trend. From there, the 3/8/13 minute stochastics all slipped down
setting up a nice 5 lane downmove. The 3/8 min stochastics formed dual mini
inverse pups. Therefore the 3/8 coupled with the 60 minute mini inverse pups set
up the perfect storm ala three converging time frame mini inverse pups. This
allowed us to step in on the OIH short at 3:25pm at 136.60 with a trail stop at
136.80 just above the 136.67 resistance set by the 60 min 5 period ma. OIH took
a hard drop a few minutes later to LOCK the 136.10 overshoots, out + .50 on its
way down to the 135.90 coil supports. This was a perfect storm setup in a very
flat light volume market otherwise.
Once again, pace yourself in this light market until volume
returns mid September. If you do play this market stick to the first
30-45minutes and then last hour with TIGHT filters. Good Trading!
Jea
Yu has been involved with the equities markets for over 10-years. He specializes
with intraday trading in the U.S. equities and futures markets. To receive a
free 7 day trial to Jea Yu’s Underground Trading Pit,
click here or call 888.484.8220, ext. 1.