How To Sift Through The Noise
As has been the case for several weeks now,
patience and selectivity have led to consistent gains on the HVT
front. Yesterday was no exception. I have received several e-mails recently
asking how to sift through the noise and identify the setups that have a chance
of working. As a result, I captured a trade from yesterday which highlights this
perfectly:
In the chart above, I have drawn in trend channels to
illustrate that there were no robust 3 point bursts in the S&Ps in order for you
to have considered a trade. Some may look at the move from 870 down to 875 nine
minutes into the session, but given that that move occurred when the trend was
still arguably up, there was no way to know that that move would have produced
such favorable range. You cannot let these moves get you frustrated, they do not
meet the criteria.
Then with the move higher into the 7:00 AM PST hour,
there were yet again no 3+ point spikes.
Then, the S&Ps finally make a break that is consistent
with the current trend — up. However, there was no way to know that this
particular one would be the move that finally had some follow through. The way I
see it, if you played this move, it was due more to luck than rigorous
methodology. This move, however, IS the one that let me know that it is time to
start seeking out pullback long entries. The range has been broken, I make the
assumption that there will be other participants lured in. So, now we wait for a
reasonable pullback, then strike.
And here it is, a slight pullback, consolidation, then
a thrust out of the consolidation that is confirmed by the stochastics.
AIG was my stock of choice for this move. It displayed
an identical pattern.
I did two more such trades for the morning. A grand
total of three, all winners. That was it. Yes, this is far less active than I
would like to be, but this is what is demanded currently. No room to create or
force trades. Until the range expands, this is my routine day in and day
out. Beats punching a time clock.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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I will be out of the office on Friday and Monday. My
colleague Bo Harvey will be penning the morning article. I trust you will find
his insights helpful.
P.S. I have a new trading module and a new audio service coming out.
Click here for information about the module. Information about the new
service will be available shortly.