Smooth Swing Action Trading Today

Mar 27, 2008: 5:52 PM CST

Today’s intraday price swings were smooth, pronounced, and stable. It was an ideal day to be an intraday ‘swing’ trader.

By ‘swing’ trader, I mean simply trying to capture the market’s most probable sustained price action in one direction until that direction is reversed by the opposing force. The trend was down overall, but there were amazing swings that the nimble traders were able to capture both up and down.

I know I’ve said this 100 times but the first play of the day when the market gaps is to trade against the gap to “Fade the Gap” back down to the opening price. That trade working out instantly today, giving you almost 70 points of potential profit right off the bat.

The market continued its swing lower before forming a new momentum low and then ralling up to find resistance near yesterday’s close (a common phenomenon). Rather than continuing downward, bulls found prices attractive and then forced prices to eject upwards at key support (from the confluence of the 50 and 20 period moving averages) which completed the “measured move” portion of a bull flag that most people – myself included – didn’t see coming (because my bias was strongly to the downside today).

Nevertheless, the bull flag terminated exactly at the price that it was projected to do so (measured move), which happened to correspond with the falling 200 period moving average. A dual test of this zone (and failure to rise above it) set up a more powerful short-sell trade which trended down and tested the morning session’s lows (and helped validate some of the earlier pessimism in the market).

Price turned, forming a momentum divergence and swung back upwards to test yesterday’s closing price, and failed at this point to tread any higher. The failure swing hinted that lower prices were yet to come.

Unfortunately for the bulls, the market closed once again on its lows for the day (despite the after-market up candles after the 4:00 bell rang), which certainly depressed some of the buyers and validated the sellers.

Nevertheless, there were still clean swings and clean patterns within the structure of price that set up profitable, low risk trade ideas.

4 Comments

4 Responses to “Smooth Swing Action Trading Today”

  1. Anonymous Says:

    Cory,

    You’re still heavy into the blogging I see. Glad to see you’re still doing well. Have you been surviving these markets? I’ll talk to you soon.

    Active Trader / Rich Strehl

  2. gary Says:

    Just curious. How could one tell that the price action between 11:30 and 12:00 was a bull flag and the price action between 12:30 and 1:00 was not?

  3. Corey Rosenbloom Says:

    Thanks, Rich! Always good to hear from you. I’ve virtually abandoned swing trading tactics for the time being and have focused almost exclusively on the Dow-Mini futures intraday. It’s been good, but it’s far more active than I’m used to!
    Hope all’s well with you.

  4. Corey Rosenbloom Says:

    Gary,

    I missed the morning bull flag because I was biased to the downside. The “Measured Move” portion up to 12:30 was unlikely to be a second bull flag because it’s very uncommon for a “measured move projection” to be a new flag of the next pattern. Usually, there is a reversal or at least consolidation off the measured move target (like there was when price couldn’t break the 200 period MA – it also used up the buying power to that point).

    I didn’t point it out in the analysis above, but there was actually a larger bear flag that developed from 1:00 into 4:00. I’ve been accused of pointing out way too many flag patterns, but that indeed was also a valid pattern.

    To discover them, look for a large burst or impulse and then look for a 45 degree angle against that burst which leads to a moving average zone. At that point, put the trade on with a tight stop and if the market completes the measured move, you’ll be in a position to profit and if not, your stop will be quite close to entry. That’s why I love these patterns so much.