Thursday, December 01, 2005

Kissback of broken trendline or a breakout ?

Yesterday's hourly sell on SPX was good for 13 points, if one covered at yesterday's close. If one held it till today morning's big gap-up, it would have been a breakeven to slighly profitable trade, depending on where one exited. Had they not created that monster gap up, it would have taken quite a while for them to turn the hourly up. The shorts would have sensed the hourlies turning up and start covering thier positions at lower levels, without leaving much fuel for a breakout. On the other hand a huge gap up ensures that the shorts will start covering at higher levels rather than lower levels, causing a breakout.

This is smelling like a false breakout for now. So far the price action has kissed the broken trendline from below. A failure here could mean a retest of yesterday's lows. I would call this another good shorting opportunity with a hard stop around 1273.25. If 1273 is taken out, i would stay away from the short side until another good setup comes up.

Wednesday, November 30, 2005

SPX - Hourly Sell signal today morning

Going forward, i will share the signals from my Momentum/Trend trading system. The signals from my system never comes at the exact tops or bottoms for a simple reason, because tops or bottoms can never be identified in real-time and are known only in hindsight. When a market is at or near the top, for instance, the moving averages are pointed upward and the momentum is up (although the the rate of change of momentum is slowing down i.e a divergence). As long as the momentum breaks and the moving averages turn around, the market is essentially in a uptrend. If someone catches a top, it's just luck. There's a price to be paid for top and bottom picking. Tops and bottoms can be picked with multiple probes with tight stops and stop outs. The multiple stopout losses can add up and at the same time, one would also lose the opportunity of participating in the uptrend. My hourly trading system is designed to give a sell or buy signals about 5-10 points from the top or bottom and the signals could be valid for anywhere between 1-5 days and sometimes even more. I will try to post the chart with buy/sell signals from my system everyday on ES (E-mini S&P 500) and Gold, with stop loss levels. Today morning i got a sell on ES at 1263 and so far remains on a sell. I will not try to preempt my system by attempting to closeout my positions before the signal reverses. If the market makes an extreme move, i may opt to take partial profits. So it's essentially swing trend trading, but exiting and reversing when the trend changes.