Why I Follow This High-Probability Setup
The daily ranges continue to
tighten on both the S&P and Nasdaq markets as we continue to wait for an
extension or failure of critical hourly supports.Â
And while the hourly 15MA handle bases we’ve been
discussing for the past few days have been holding in spite of some price
probing, which have been good for a couple of 7 to 10 point ES pops
(certainly nothing to sneeze at from an intraday perspective), the larger
issue of whether the pattern is strong enough to bust
through critical 910-915 ES and 1050-1060 NQ resistance remains to be seen.
Traders that have been following my babbling in the column and
educational materials
over the past few years know the cup-and-handle formation with a 15MA handle
base is one of the higher probability setups I follow as it nicely combines our
key signals with the underlying trader psychology that comprises this particular
pattern. One can look no farther than Exhibit A from
this morning, where there was a nice 5-point pop off the same pattern on the
3-minute chart with a 10:15am ET entry. And typically, stubborn resistances can
only be broken by such patterns.
Yet currently there’s quite an hourly battle between price vs. momentum
divergence and trend support which continues to hold, so current probability is
a bit of a coin flip which further emphasizes the need for quality entries as
close to premise supports as possible. And as I’ve said before, I’ll continue
to respect trend supports over the divergence until violated. Clearly, the
longer we consolidate, the more potential power and trade potential in the
ultimate range resolution.
ES (S&P)Â Â Â Â Â
Thursday December 12, 2002 11:30 A.M. ET       NQ
(Nasdaq)
Moving Avg Legend:
5MA
15MA 60-Min 15MA
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Good Trading!
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