Projecting the Bull Flag High of April 3

Apr 3, 2009: 5:01 PM CST

If you see a potential Bull Flag setting up, do you know how to project the Profit Target?  Let’s use Friday’s intraday action and the bull flag that set-up mid-day to learn how to find the price projection point of a Measured Move or Bull Flag.

I described earlier how to use the Fibonacci Price Projection tool in TradeStation (which is the same in other programs I’m sure) to Project a “Measured Move” off a Flag and I wanted to show today’s action as an example.  Please reference that article for a more detailed description.

To review, there are three parts to a Bull (or bear) Flag:

1.  The “Pole“  (which is the initial up-thrust)

2.  The “Flag” (which is the retracement against the impulse)

3.  The “Measured Move” (which is the portion you want to try to capture for profit)

Use your Fibonacci price projection tool to start with the Low of the Pole, draw (or click) to the High of the Pole, and then draw (or click) to where you suspect the Flag will find support.  The software then draws the respective Fibonacci projection for you – in this case, the 100% Price Projection.

Keep in mind that the Flag should find support at a Fibonacci Retracement of the Pole.  In this case, the flag found support at the 50.0% retracement (not shown).

Even if you miss profiting from a good piece of the Measured Move, you can identify expected resistance from the Price Projection – the dojis there gave you clues odds favored a return at least to the 20 EMA which was good for a scalp.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

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Steenbarger’s The Daily Trading Coach Now Available

Apr 3, 2009: 2:12 PM CST

It’s finally here!  Dr. Brett Steenbarger’s much-anticipated new book “The Daily Trading Coach” or “101 Lessons for Becoming Your Own Trading Psychologist” is now available for purchase from Amazon.com (for only $30).

This is the book most of us have been anticipating since the end of last year – it’s an extension of his daily posts at the Trader Feed Blog which is required reading in the retail trading community.  Steenbarger describes his goal as being to “create a ‘coach in a book” with an emphasis on practical strategies that can help traders manage themselves and their trading performance.”

Dr. Steenbarger also has set up a special blogsite entitled “Becoming Your Own Trading Coach” which is dedicated to sharing more from the new book.

You can see the Ten Chapters from his book on that blogsite.

In addition, Dr. Steenbarger included a special interview section (similar to Jack Schwager’s Market Wizards) where he asks 18 active trading professionals to describe three insights from their experience which is intended to help newer traders.

I’m honored and humbled to have been asked to participate in that dialog and believe the lessons from the contributors will help share different perspectives on trading tactics and strategies and connect with the reader.  Contributors run the gamut from fundamental to technical to quantitative strategies that will speak to readers in their lessons.  Dr. Steenbarger ties his insights into each interview which creates a unified and intriguing flow.

I know this post is unusually full of links, but I wanted to share some links to other bloggers who have also written about this book, some of which include reviews already.

Michael Bellafiore shares a personal story of working together with Dr. Steenbarger and gives a must-read recommendation at his SMB Training Blog (which also provides excellent insight into a proprietary trading firm and the lessons learned there).

John Forman of the Essentials of Trading shares his review of the book which includes some drawbacks from his perspective and also how he would use the book.

Chris Perruna shares his thoughts prior to the book being released in his anticipatory post.

I’m looking forward to finishing my copy and will try to share a review when complete.

A special thank you to Dr. Steenbarger for all the hard work and top-notch content he provides readers on a daily basis, all without asking anything in return.   Please share with him your appreciation.

Corey Rosenbloom
Afraid to Trade.com

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Hewison Video: What’s Next for the S&P 500?

Apr 3, 2009: 9:56 AM CST

Adam Hewison released a great video that touches on multiple timeframes, Fibonacci retracements (and current overhead resistance) and even the Elliott Wave Principle – all in a six-minute video!


(clicking the chart opens Adam’s video page)

Entitled “What’s Next for the S&P 500” Hewison begins by addressing current Fibonacci retracement resistance at 840 from the January 2009 highs to the March lows and then shows the current Monthly, Weekly, and Daily “Trade Triangles” and what happens when multiple timeframe trend and signals conflict with each other (which is helpful even to non-members).

Finally, Adam shares his Elliott Wave count using a monthly line chart and does a quick introduction to Elliott Wave (albeit leaving out corrective waves due to time constraints) and then traces out a possible count.  Adam believes we just completed Major Wave 3 in March, which means he’s counting us currently in a Major Wave 4 retracement and is expecting a Major Wave 5 to take us to new lows eventually, but also notes the key level that his count would be invalidated.

Thanks as always to Adam and crew for making these videos available.

Corey Rosenbloom
Afraid to Trade.com

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Intraday Highs formed on TICK Divergence and Three Push

Apr 2, 2009: 4:14 PM CST

Earlier this afternoon, I updated Twitter followers to the Triple-Swing Negative TICK divergence that set-up into the noon highs and a few people requested that I show that on a chart.  This post reflects the intraday action of April 2nd which shows a three-swing negative TICK divergence, three push pattern, and interesting Elliott Wave structure that developed throughout the day.  Let’s see all that.

The day began with a large-scale overnight gap thanks mainly to the change in Mark-to-Market accounting rules, but the day did not resolve as a Trend Day.

There was a “Three Push” reversal pattern that developed off a three-swing negative momentum divergence (not shown), but the educational focus of this post is the Three-Swing Negative TICK Divergence.  The large blue numbers reflect the “Three Push” pattern.

I’m showing the TICK as candle bars in the lower chart to see the absolute highs and lows and then I’ve overlaid a 5 period simple moving average of the TICKs (5-minute bars) to get a little more information and smooth out the data.

Notice that each push higher in price formed on a lower high in BOTH the TICK and the 5-period SMA of the TICK (which I have highlighted in red).  Look closely to see the TICK making new lows on each swing down.

Moreover, I’ve included an Elliott Wave (fractal) Count in purple which shows not only an idealized 5-wave progression into the intraday highs, but also an ideal “ABC” Corrective move which took place after the high was formed.

Look towards the end of the day (“C” Wave) at the long upper shadows (candles) that formed around 2:30 CST (as price failed to rise above the falling 20 EMA).  Those were bearish hints of lower prices yet to come as the “C” Wave progressed.  There were also shooting stars and dojis that could have enhanced analysis.

Continue looking into today’s structure to see what else you can learn from the price patterns that developed.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

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Inside the 60 minute SPY V-Bottom Reversal Pattern

Apr 2, 2009: 12:30 PM CST

It seems like all eyes have been focused on the S&P 500 and what it’s been up to over the last few weeks.  Let’s step inside the recent V-Bottom Reversal Formation that set-up and track the move on the 60 minute chart starting with the push to new lows and ending with mid-day April 2nd’s push to new highs.


Click for larger image

Price spent most of February trending down until March 6th when price found a meaningful bottom, formed a sort of “V” Pattern (not quite a “V-Spike” pattern, but a “V” nonetheless) and has now created a near mirror image of the prior decline, rallying through most of March.

The V-Pattern formed on a clear positive momentum divergence (not all divergences lead to trend reversals, but almost all trend reversals are preceded by some type of divergence).

I’m also showing a volume divergence (as well as a slight negative momentum divergence) that set-up going into April, but today’s bullish action over-rules them both.  The “Mark-to-Market” accounting rules were changed to be more favorable to Financial Companies which – among other news – sent buyers rushing back into the market.

If you look very closely, a Cradle Sell was mere points away from forming yesterday but it didn’t officially form (price managed to dip beneath the 20 and 50 EMAs but didn’t hold long enough to force a crossover) so that was an interesting structural development as well.  That downswing served as a Bear Trap, and part of today’s push up likely is resulting from Bears getting short into what appeared to be a valid reversal pattern down.

To add more interesting developments to the structure, we formed a New Momentum Low at the end of March and then turned right around to form a New Momentum High today.  The market currently is a little more difficult than normal to trade.

Keep watching the structure as it develops and watch your risk.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

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