Using The Three-Minute Chart for Setups

  • December 11, 2002
  • Raghee Horner


Tuesday was
“headfake” day: low volume and no real buying catalyst. So the FOMC
left well enough alone with the rates, however, the release of the FOMC Minutes
at 2:00 p.m. ET will be a s-l-o-w digestion of information and opinion… Traders
will be reading between the lines.

The Wednesday morning session action will be dictated by the slew of 8:30 a.m.
ET reports, especially Retail Sales and Initial Claims. IBM gave the techs a
boost late in the day, but other than that, it was a day that saw a bounce
mainly because of Monday’s sell off.

Let’s look at
three-minute chart setups as not to get too rusty on the plays. This is the
bread-and-butter chart.

Some of the most important support
and resistance levels are created by gaps!
The reason I have gaps marked on
all trading charts is because with these levels in the forefront I am less
likely to miss reversal areas. Gaps are not marked because I fade them
regularly. I will, however, put an article together in the near future
explaining how I trade gaps, as I have received many, many emails concerning
just that.

Each level I mark — as well as the Fib Levels I mark intraday — will be
potential decision or “trading levels.”  I will wait for these prices to trade
before making a decision. This is very similar to how I trade the “AM”
pivots: first price, then confirmation.

You can also see
that when prices are trading in an identifiable range I will use Stochastics.  For
the morning session, I typically measure whether prices are trading in a range
by whether they are trading beyond the top and bottom pivots. My style is geared
toward taking advantage of the morning session as I find that it suits my
trading style best…and that I get awful tired after lunch  ;)

If I had my way,
I’d insist that most traders make the focus of the day the morning session and
execute the majority of their trades before 11:15 a.m. to 11:30 a.m.

 

Top and Bottom Pivots breaks (TP, BP) must be confirmed by MACD!  While there may be instances where
the MACD kept you from trade…I find this filter very accurate for the morning
session.  As trading rolls out from lunch, I find the filter much less accurate
as the afternoon typically — and especially as of late — becomes quite choppy
and if I am trading after lunch, I will rely on price and Stochastics. 



One of my
favorite ways to set trading levels for the opening is looking at the 24 chart. 
I also find that if I drop a Fibonacci Retracement from the last major move of
the prior session I get very accurate levels.

 

For those of you that wanted a follow up to my daily chart of ESZ2…I see support
at 881-885 with the low range of support being 871-873.

Have a great
week!  Questions? Comments?


Raghee

Â