Why Patience Is Required
While the trading has been subdued, I have often stated there are always one
to two setups each day that will see you through. I am sure you will recall how
often I have been mentioning the 840 level in the S&Ps in recent columns. Well,
today it came into play in a big way. Not only was it critical support, but
today it coincided with a break of a very key trendline that had been forming in
recent sessions (see chart below). I believe my fellow colleagues would refer to
this as symmetry.
Nonetheless, if you were keeping an eye on this development, you were able to
place a trade with a stop that represented a low-risk, but excellent reward
entry.
Naturally, this is not the standard type of HVT
trade that we are accustomed to taking, but still, it utilizes the same
principles and techniques. Take a look at stocks like
IBM, C and
WMT.Â
In this case, the five-minute chart of IBM not only demonstrates a standard
HVT short setup (described in my book and depicted by the green line), but also
mirrors the time to the minute of the rollover in the S&Ps below the key 840
level. When you have a key technical level broken in the futures and a standard
HVT setup, it is a powerful combination. The five-minute charts of C and WMT are
similar.
They all closely tracked the slow drip lower in the S&Ps for the reminder of
the afternoon. There is little doubt based on recent weeks that HVT in the pure
sense is only happening on the opening. Trades like the one mentioned above are
what you need to be on the lookout for for the remainder of the session.
The futures are under pressure again this morning and now look poised to
attack some other key support levels in the market.
I suspect that any support at 829 and 824 may offer a decent bounce, but I
would prefer to wait for either of those levels to become resistance and then
establish a short position from there rather than trying to pick a bottom.
A break of either of these levels and a break of 32.25 on
Citigroup (C) should be seen as a negative.
For me, this trade was one of three I did all day. Talk about being
patient. But it clearly illustrates what is required in this market. In the
interim I was answering a slew of e-mails I had received over the weekend. I was
noting a theme developing. Most of them were with regard to how few picks have
been on my nightly service. I figured it would be a good idea to update them
what I was (or in this case, was not) seeing in the market. That e-mail is
below. I believe you will find helpful.
Since the release of my book, there are literally a few hundred
subscribers on this service, some are familiar with the objective of the
service, others are not. Let me take a few moments to address a question I
have been getting a lot lately:
“Why are there so few intraday picks?”
It is a very reasonable question given that most people associate my
style of trading with a high frequency of trades with very short
duration. While that is still the case and will continue to be going forward,
one must not lose sight of the big picture to make money consistently.
In the current trading environment, where the range intraday is pretty
narrow, you need to be very selective as a trader, marginal setups have no
place in your game plan. Sure, I can throw up some half-baked ideas simply so
you feel you are getting “value” from the service and so you feel productive
at the end of the day, but it will only take you farther from your goal,
making money. Risk aversion is my number one rule. My second rule is to
identify HIGH-PROBABILITY setups not only for myself, but also for YOU.
I had a mentor in my office a few months back. Naturally, as luck would
have it, the market was pretty quiet that week. I sat here agonizing that
there was so little to show him. To make a long story short, word eventually
got back to me from Larry Connors that that week was incredibly productive for
this person for one simple fact:
It showed him how a trader who has been doing it for years plays a dead
market, he does nothing.
For those of you who trade from home, it is difficult to get feedback,
as well as measure yourself against peers. My essay here tonight should prove
to you that nimble fingers on your keyboard are not required at this point in
time. Be patient, check your e-mail for updates from me and do not lose sight
of the big picture — longevity as a trader. Yes, intraday there are only a
few trades that qualify as “ideal,” but make yourself available when they are
there, rather than slugging it out when nothing is going on.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 875 | *1039-44* |
| 860 | *1019-25* |
| *855-56* | 1016 |
| 852 | 1000 |
| 847 | 989-90 |
| 840 | 978 |
| *836* | 974 |
| 829 | *962* |
| **822-23** | 958 |
| 817 |
Don’t forget, my new book, “How
I’ve Achieved Triple-Digit Returns Daytrading…4 Hours A Day” is now
available. Order today and you will receive a 10% discount.
As always, feel free to send me your comments and
questions.
PS: Buy my book, and get a
FREE 2 Week Trial to my Daytrading Service.
Click here for more details.
**I may not be writing a column for Wednesday and
Thursday due to a previous engagement. If the markets heat up, I will do my best
to update you. My column will be back on Friday. I will be posting Support and
Resistance Levels for the futures, however.