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A Great Trade In A Bear Market

I’m bearish on the market for the short run. (Check out my latest Free TradeSmith at http://courtneysmith.com for my latest analysis.)

 

So how can we make money?

 

Bear markets are bad for exchanges like the NYSE. Volume goes down (unless there is a capitulation bottom). People get depressed.

 

So I’m short term bearish on the CME Group. You can short the stock or buy puts on it. Be sure to have a protective stop if you sell the stock

Free video training, I show you the elements of Holistic Trading and how you can make money trading with these concepts.

I show you specific techniques from the Holistic Trading arsenal. Take them and make money with them!

CourtneySmith.com/Second-part-of-your-Training/

Holistic Trading is a way of investing that takes a 360 degree look at the market so you get a very deep understanding of the current market. Very little will surprise you. You will feel a sense of ease as you will know what's going to happen before it happens. You will understand who is controlling the market and how to trade profitably with that information.

I explain it in this free video training which you can see by clicking here.

Trade War, Hillary and Donald, and your money

For the first time in over 100 years, we will have two candidates who are not in favor of free trade.

 

Both Hillary and the Donald believe that other countries are taking advantage of the US. They both want to through up high tariffs and duties.

 

The Donald will renegotiate with everyone and, of course, it will be beautiful and great after he is through negotiating.

 

Hillary will just hit a giant reset button. Oh wait, that didn’t work in Russia.

 

This is hurting the stock market right now. The market believes that free trade is good for the global economy. Shutting down global trade means a slower economy if not a recession/depression.

 

The last time we had a trade war was back in the 1930’s when just about every country went to war in trade. This was a major cause of the Great Depression. Suppressing trade means less sales for companies and therefore less profits and therefore laying people off.

 

But some people say, like Donald and Hillary, that the US is being taken advantage of. That other countries are using their currencies to take business from us. That they can export to us but we can’t export to them.

 

That is certainly true.

 

But we need to weigh that against having a Great Depression. I’ll take the small problems.

 

I doubt that Congress will back wholesale changes to the trade agreements in place so I don’t expect a lot of change when the new President comes in. But Presidents have a lot of power and can cause a trade war on their own if they want. Just not as extensive.

 

Look for the markets to keep suffering while the election is going on. This election will not cause a bear market but it will keep a cap on any big bull market.

 

P.S. Check out my free podcast on iTunes to keep abreast of these issues and their effect on the market. Search for Wealthbuilder.

Trade Craft: 5 Steps to a Great Trade

While I typically write forward-looking commentary and analysis, I wanted to write a piece that showed the anatomy of a trade in 5 simple steps, essentially tying together all the various aspects of the education that I teach.

A trader friend recently took my Swing Trade Pro course - and loved it! As a matter of fact, he gave me perhaps the best testimonial I could've gotten for the course - "Frank, this is really good sh*t!" (Hi Tom!)

He told me about a great trade he had taken in Taser International ($TASR), and asked me to take a look. After checking it out, I thought it would be a great idea to share with you how my approach played out in this stock - in 5 simple steps.

Step 1: Identify the Setup

In the daily chart of TASR, you see a very distinct pattern that had formed - the Inside Day pattern. This pattern is a favorite among swing traders because it has the ability to spark some of the best breakouts in the market.

The key to this setup is to be patient and wait for the right "opening relationship". That is, just because an Inside Day pattern has formed doesn't mean automatic profits. You have to wait for price to break out from the pattern in a manner that provides the best odds for success.

In this case, price opened the next session with a gap up, out of range and out of value. This is the most bullish opening relationship you could ask for. Any time price gaps out of the prior day's price range, this is a clear indication that market sentiment has shifted overnight and initiative participants are eager to begin pushing price to new value.

Now that we have a great setup with a great opening relationship, let's move to Step 2.

Step 2: Identify the Entry

There are many ways to enter a trade. I teach 3 primary techniques for executing entries, along with many hybrids for identifying trade location - easily totaling 10 or more methods that I use interchangeably given the specific scenario.

In this trade example, I'll identify three ways that I teach to enter a trade.

1. Retest Entry: When the market gaps out of range and value, I watch the first 15-minute bar of the day to see how it responds after the gap. If price maintains gap integrity and closes bullishly, then I set a Buy Limit order at the center of the 15-minute candlestick. In this case, the Buy Limit is set to $7.30, which would have triggered during four of the next five 15-minute bars.

This method gets you into the trade 2 ticks from the low after you set the entry. Not bad.

2. OR-30 Breakout: If you happen to miss the Retest Entry, it's then time to try for a 30-minute Opening Range breakout entry. The idea here is to Buy a breakout from the opening 30-minute range, which is done by setting a Stop Market order to Buy a tick or two above the 30-minute opening high price. This technique gets you into the trade at $7.36.

3. OR-30 Bounce: If you happen to miss the entries for both the Retest and OR Breakout techniques, don't fret. Instead, use the OR-30 Bounce technique. Place an Ambush Buy Limit back at the opening range high price at $7.35 and wait to be filled.

Oftentimes, price will return to retest a breakout level before resuming in the original direction. When this occurs, the traders that were left behind will now board the train in this zone, thereby adding additional fuel to the up move.

This technique gets you into the trade at $7.35

Step 3: Identify the Trade Management

Here's the deal, a properly outlined trade management approach is a MUST. You must know EXACTLY what you will do when you trigger a trade. Will you use profit targets? How about trailing stops? How are you calculating your fixed loss stop? Are you scaling out of the trade? These questions and more must be answered BEFORE you enter a trade.

As a professional trader, you must have a toolkit that includes all the various approaches that you have at your disposal. All you have to decide is which to use for this specific trade. The trade will dictate your approach.

Let's start with the stop. I'm a fan of using Average Daily Range (ADR) in my trading - for both stops and targets. For stops, it's as easy as calculating the average daily range over the last 10 periods, and then cutting that value in half. This is your stop amount.

For TASR, the 10-day ADR was $0.57 on the day of the setup (Feb 27), which means TASR moves 57 ticks per day on average. Cutting this value in half gives us a stop amount of $0.28, which is half the daily range.

For targets, you can use a variety of approaches. I like to trade to profit targets because I can calculate targets with a high degree of accuracy using my ADR Method (RT Edition and SWING Edition).

For a standard swing trade, I'll calculate a 5-day ADR target. In the case of TASR, the average 5-day MDR (Multiple Day Range) on the day of the setup was $1.405, which means during the most recent period of time, TASR moved on average $1.40 every 5 days.

Since price doesn't always move in exact averages (if ever), I like to use 75% of the average MDR, which is $1.05. Therefore, we project $1.05 higher from the prior day's low price of $6.93 in order to get our 5-day profit target of $7.98.

We'll play to this target.

Step 4: Execute the Trade

Here's the fun part. You've identified the setup, identified the entry techniques that you can use for this particular setup, and you've already identified the stop and profit target that you'll use.

All that's left is to execute your plan. Plan the trade; trade the plan.

This is when you must approach trading without emotion; like a machine. You are just executing a plan. That's all. Nothing more, nothing less.

By approaching trading in this manner, you are virtually eliminating emotion. Furthermore, you are approaching trading like a business and merely executing the task at hand.

Step 5: Sit on Your Hands

Once you've triggered your entry, and set your stop and profit target…DON'T TOUCH ANYTHING! Once money is on the line, clear thinking happens to go out the window. That's why you plan the trade ahead of time when you are thinking at your clearest.

Any tinkering with the trade that this point is a recipe for a botched trade.

The Final Tally

As it turns out, the profit target of $7.98 was reached in exactly 5 days, giving you a solid trade with great trade location, well-defined risk, and a high-probability target. Not bad for 5 days of "work".

Here's how the trade turned out using the 3 different entry methods:

Retest Entry: Entry - $7.30, Stop - $7.02, Target - $7.98, Gain of +9.3%

OR Breakout: Entry - $7.36, Stop - $7.08, Target - $7.98, Gain of +8.4%

OR Bounce: Entry - $7.35, Stop - $7.07, Target - $7.98, Gain of +8.5%

While every trade in the market is different, having a proven method for attacking the market is a must. Every method and technique used above is one of a series of techniques, concepts, and methods that I teach at PivotBoss.

If you liked this post, let me know in the comments section below. If there's enough interest, I'll make this type of post a regular at PivotBoss.

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Jacobs Engineering Group Looks Bullish

Jacobs Engineering Group, Inc. has enjoyed a nice four-month bull trend, and could be on the verge of another surge higher. Here's more…

Confluence

The daily chart of JEC shows price has trended steadily higher the last four months, gaining 30% since the beginning of November. The recent pull-back from the 52-week high may prove to be a very nice swing buying opportunity.

As a matter of fact, the pull-back from recent highs led price to drop right into a solid source of support via 3-way confluence.

Tuesday's trading activity led to the formation of a bullish reversal candlestick pattern that developed right at the monthly pivot range (pink lines), quarterly VWAP (blue dotted line), and within the trigger zone of "stacked & sloped" pivot-based moving averages (grey lines).

This trifecta of support could lead to a solid 3- to 5-day advance in the days ahead, and potentially more.

The Game Plan

Use the Retest Entry technique to trigger a Long position at $47.40 within the next day or two, using a 1/2 ADR stop at $46.80, and targets at 48.94, 49.13, and 49.85.

Keep in mind, if price breaks (and closes below) the monthly pivot range at 46.36, the trade is over, as it no longer satisfies the conditions of a pull-back swing trading opportunity.

Heating Oil Update

my last blog post, I wrote about Heating Oil and its potential to move back toward 3.106. This target was reached in 6 days, and continues to push farther.

In just nine days, this trade has made 168% on margin. Beautiful.

Let's see how this JEC setup plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Starwood Hotels is Ready to Move

Starwood Hotels & Resorts (HOT) is testing significant resistance, and could be on the verge of a major move ahead. Here's why…

Resistance at $61

The daily chart shows HOT is currently testing a significant area of resistance at the $61 level. As a matter of fact, this level has been resistance for two years, and every test at this level has led to several stern rejections.

In 2012, the average move away from the $61 level was 20%, so we could be on the verge of a similar move very soon.

Also, it's interesting to note that the monthly R2 Floor Pivot sits right at $61.12, providing a solid confluence of resistance. Clearly, a breakout or reversal away from this level could lead to some exciting price action.

Compression

Over the last two years, every reversal away from the $61 level has been swift and sharp, similar to v-bottom reversals.

However, this is not the case this time around, as HOT has been trading within a highly compressed trading range below $61 for the last 15 sessions. In my opinion, this compression could signal an even bigger move ahead, regardless of direction.

The Range Ratio indicator shows the average 15-day price range is significantly smaller than usual, as evidenced by two consecutive readings below 0.75. Readings below 0.75 usually signal impending breakouts, so watch the outer boundaries of the 15-day trading range for a confirmed move.

For reference, I've marked similar ranges from the last few months that have yielded great results.

The Game Plan

Thursday's bearish Outside Day reversal candlestick pattern hints at a sell-off ahead. However, a break back below the monthly R1 pivot and through the bottom of the 15-day range at $58.95 will confirm selling pressure. Here are the bear targets to watch: $56, $54, and $52.

On the bull side, watch $61.15 for signs of strength. A break beyond this level could spark initiative buying participation, which could pave the way for big strength ahead. Here are the bull targets to watch: $64.50, $65.50, and $66.35.

Keep in mind, price will likely continue to build out within the boundaries of the tight range until a decisive breakout occurs. Be patient, and ready.

Let's see how this one plays out!

The Complete Swing Trading Course

Don't forget, Friday is the last day to order the 3-disc DVD set of The Complete Swing Trading Course, with the chance of receiving two additional live educational trading webinars that complement the training.

I've received an immense response from traders all over the world, so be sure to take advantage of the bonus offer!  

CLICK HERE TO READ MORE ABOUT THE COURSE

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

E-Mini NASDAQ Poised for a Breakout

After a few weeks of range bound activity, the E-Mini NASDAQ 100 seems poised for a major breakout opportunity. Here's why…

Major Compression

The daily chart shows the E-Mini NASDAQ 100 is trading within the boundaries of a highly compressed price range.

As it turns out, this price range actually encompasses the year's trading thus far. The fact that markets ebb and flow between compression and expansion phases, leads me to believe we'll likely see a breakout from this trading range soon.

As a matter of fact, the Range Ratio calculation shows the current average 10-day price range is vastly tighter than normal (a reading below 0.75), which is usually a precursor to explosive breakouts and range expansion.

Furthermore, the NQ has formed an Inside Day pattern, whereby the last day's price range fell within the price range of the preceding session. This pattern usually leads to breakout opportunities, as well.

Targets to Watch

Regardless of direction, a breakout should yield solid results. As a matter of fact, I'm estimating that a move of around 98.25 points could be seen over the upcoming 10 days.

You see, the current average 10-day price range is 78.50 points. When price breaks free from highly compressed ranges, it tends to move a distance of about 125% of the current average multi-day range (78.50 x 1.25 = 98.25). Of course, this is just a Rule of Thumb, but you'd be surprised how accurate this calculation can be.

With resistance being 2,752, and support being 2,700, we're looking at 10-day targets of 2,850.25 for Bulls and 2,601.75 for Bears. Guess what? The monthly R2 Floor Pivot is sitting at 2,852.25, and the monthly S1 pivot is 2,586.25, which are very close to the MDR calculations above.

Keep in mind, the NQ may continue to churn slowly within the trading range over the next few days. However, once the market sees a worthy catalyst, look for a potentially big breakout opportunity to occur.

Read more here...

S&P 500 2013 Outlook: Massive Correction Ahead?

Here's my 2013 market outlook for the S&P 500, wherein I discuss medium and long term analysis, and reveal why I believe it's time to begin preparing for a potentially large correction ahead. Read More…

Medium Term Outlook

I can't help but feel a little deja vu when I see the daily chart of the S&P 500 cash index. You see, the index has gotten a very nice bullish start to the year by breaking through the top of the clearly-defined triangle pattern, which developed over the course of the last four months of 2012.

As it turns out, the index started the 2012 year in much the same way, but the triangle pattern was quite a bit larger than the current version. I wrote about the 2012 triangle last year (HERE), and my analysis was fairly on point.

This time around feels similar, only I believe we're at the tail end of a very decent 4-year bull trend. More on this later.

The daily chart shows the $SPX got a clean breakout through the upper line of the triangle on the first trading day of 2013 (just like last year). So far, prices have held fairly decently just 9 trading days into the new year.

Since the backend of the triangle measures about 130 points, I'll be looking for the $SPX to approach a target of about 1,545 within the next three months, with an outside chance of reaching as high as 1,580.

Keep in mind, the S&P is currently testing a very important wall of resistance at 1,475, which also corresponds to the monthly R2 Floor pivot. If the index cannot rise beyond this level soon, we could be looking at a near-term sell-off that could spark a test of the monthly pivot range at around 1,425.

Watch 1,475 and 1,450 for short term directional conviction.

Long Term Outlook

While the triangle in the daily chart indicates short to medium term strength ahead, I'm afraid the weekly chart is giving off vibes of stalling, or perhaps worse.

Take a look at the weekly chart, and the five arrows I've drawn. The big rebound of 2009 shows a very bullish wave of price movement from the 666 bottom, complete with a nice steep slop.

The second arrow shows another wave of nice strength, but the move fell short of the distance covered during the first wave of the bull trend.

The third, fourth, and fifth waves of strength all covered vastly less distance, with each new high being relatively lower than its predecessors.

What does this tell me? The market is showing signs of exhaustion, or stalling. While the market has rallied strong for four straight years, the current price structure of the trend indicates we could be due for quite a correction ahead - one that could lead to a 20%-plus decline.

Watch 1,340

While there is no imminent sell-off danger, we'll want to keep a very close eye on 1,340, as a violation of this level could be the spark that starts a major correction. Not only would breaking 1,340 represent a break through the most recent long term higher low, but it would also be a confirmed break through the yearly pivot range (pink lines), which oftentimes spells more selling ahead.

If, or when, the time comes and a break through 1,340 occurs, look for price to test each of the first two yearly pivot levels at S1 and S2, 1,299 and 1,171 respectively, with an outside shot to reach S3 at 1,083.

Within the longer term context of this index, 1,100 should continue to hold as long term support, and could represent a very solid buying opportunity for the next major wave of strength.

In terms of timing, look for the index to remain short term bullish out of the recent daily chart triangle for the next few months. Pay attention to the month of May very closely for signs of weakness, as the well known axiom "sell in May, and go away" could be the catalyst that leads to the larger correction we've just discussed.

What are your thoughts on this analysis? Tell me what you think in the comments section below!

I'm looking forward to seeing how this one plays out!

NEW Swing Trading Course!

Just a heads up, due to popular demand I'm currently putting the final touches on a fantastic swing trading course. I'll be formally announcing the course later this week, so keep your eyes and ears peeled.

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

LMT Bullish Gartley Pattern

A Bullish Gartley Pattern recently completed on Lockheed Martin Corp (LMT on NYSE.) The XA leg of the Gartley pattern indicates the direction of the trend and the AB=CD symmetry indicates the completion of a correction against the trend. The intent is to identify the completion of the correction at the projected D point and then to open trading positions in the direction of the trend. The trade setup was complete on December 14th, 2012 when LMT traded at 89.38 at the 1.1 line. At this point we would be looking to buy one tick above the high of the most recent low bar.   

On December 18th, our stop order to buy was hit and LMT quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out our free introductory video course at at www.geometrictrading.com 

 

 

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FMC Bullish Gartley Pattern

FMC Bullish Gartley Pattern

A Bullish Gartley Pattern recently completed on FMC Corp (FMC on NYSE.) The XA leg of the Gartley pattern indicates the direction of the trend and the AB=CD symmetry indicates the completion of a correction against the trend. The trade setup was complete on November 15th, 2012 when FMC traded at 51.20. At this point we would be looking to buy one tick above the high of the November 15th low bar

On November 16th, our stop order to buy was hit and FMC quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out our free introductory video course at at www.geometrictrading.com

 

 

Sell Resistance in this E-Mini

The E-Mini S&P 400 was rejected at stern resistance for the second consecutive session today, which forecasts additional selling pressure ahead. Here's why..

Strong Resistance

The daily chart of the E-Mini S&P 400 shows price was firmly rejected at the 1,005 resistance level today, leaving a very bearish wick above resistance before closing near two-day lows.

As a matter of fact, the daily bar candle formation that developed as a result of today's trading was the engulfing (or outside day) candlestick, which tends to pinpoint key reversal points in the charts.

The fact that this candle formation occurred at this resistance level is indicative of a potential multi-day decline ahead. It's also not a coincidence that each major E-Mini also formed this highly bearish candlestick.

The 1,005 resistance level has been in play since late September, but also dates back to the March to May highs, as well. Therefore, this "line in the sand" is one to continue to watch.

Unchanged Value Setup

The 15-minute chart shows the EMD has also formed an Unchanged Value relationship. I don't often mention this relationship, but I do introduce the setup in my book Secrets of a Pivot Boss.

Basically, this relationship develops when the upcoming day's value area is virtually unchanged from the prior session's value area. This relationship indicates that current value is holding steady and that buyers and sellers are happy with current value.

However, this pattern also forecasts a potential breakout opportunity ahead, since market participants will eventually seek to push price to new value. That is, the market is happy with current value, but this phase won't last long and will usually lead to a breakout opportunity.

Like the Inside Value relationship, we'll want to see if price can open Tuesday's session with a gap out of range and value. If a gap does indeed occur, and the market maintains the integrity of the gap after the first 15 minutes, we could see a nice unidirectional trend day in the first two hours of the sessions.

Bear Targets

The current average 5-day range is 35.2 points. If we assume that Monday's high price of 1007.6 remains as the high, we can subtract the 35.2 MDR from the high to get a forecasted 5-day range that spans from 972.4 to 1007.6.

Furthermore, we can subtract 75% of the 35.2 MDR from the 1007.6 high to forecast a much higher probability target, which in this case is 981.2. As is turns out, this target has a 70% chance of being reached.

If the EMD opens the session with a violation through three-day lows at 992.20, then look for price to drop back toward the 981.2 level by the end of the week, or sooner.

Also, look to scale out of your position at the nearest VPOC (Virgin Point of Control) at 988.3.

Let's see how this one plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Game Plan for the E-Mini NASDAQ 100

The E-Mini NASDAQ 100 got an impressive breakout in Thursday's market, and broke free from the downtrending channel. Yesterday's breakout could mean more strength Friday.

Higher Value Setup

The 5-minute chart shows the NQ has developed a Higher Value relationship after yesterday's rally. As you know, the HV relationship develops when the upcoming day's Value Area is projected to be completely higher than the preceding day's VA.

Essentially, this means buyers were successfully able to establish higher value, which is quite bullish considering value had been diminishing during the downtrending channel.

Look for the market to retest the newly minted value area during the early part of Friday's market. If responsive buyers are able to defend the value area between 2,673.50 and 2,683.25, then look to buy the pull-back ahead of the likely upswing.

The Game Plan

If the market opens the session above today's projected Value Area High at 2,683.25, then I will be looking to buy anywhere within the value area between 2,673.50 and 2,683.25. I'll be watching 2,713.25 as the main target, and 2,724 as the flyer.

If the market opens within the value area, I'll be more cautious with the entry, and will look to buy as low as 2,673.25, with the same bull targets.

If the NQ opens with a gap down below 2,670, I'll look to establish a Short position between 2,673.25 and 2,678.50, as this scenario will indicate that market sentiment has completely changed. The bear targets are 2,656.50, 2,645.75, and 2,638.75.

Keep in mind, while today's main Game Plan is to buy the NQ, this is only a one-day trade. The NQ remains within a very sharp downtrend, which began in mid-September, and the current advance could merely be a rip within the current decline. Either way, there's still more short-term upside above 2,700.

Let's see how this plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Big Move Expected for the E-Mini S&P 400

The E-Mini S&P 400 futures contract (EMDZ2) closed Thursday's session within the boundaries of a two-day range that could be the catalyst for the next major breakout opportunity. Here's more…

Inside Value Setup

The 15-minute chart shows the EMD has formed an Inside Value relationship for Friday's market, which tends to forecast great momentum opportunities. You'll notice the developing value area indicator (dotted lines) both closed within the value area (blue lines) from Thursday's session, which essentially illustrate that price is coiling up ahead of a breakout.

Resistance at 1,000

The 60-minute chart shows the two-day range has formed precisely at resistance at 1,000, which is a level that has had a lot of play over the last two months. Since September, the E-Mini 400 has traded above and below 1,000, making it a clear fulcrum between bulls and bears.

In essence, a breakout in either direction from the Inside Value pattern should spark big movement. However, given Thursday's late-day price behavior, a downside break is most likely to occur at this time.

Additionally, the EMD has held below the monthly H3 Camarilla pivot all month long, which sits at 1,004. Any downside move away from this level could spark a serious move.

The Game Plan

Ideally, we'll want to see price open the RTH session outside of the prior day's price range. Therefore, we'll look to enter Shorts should price open the day below 994.5. I won't be picky, though, as an open below 996 should work just fine. Since the current 10-day ADR value is 11.3, we'll look to play to the following targets: 990.3, 987.5, and 984.7.

If price opens the session with a gap above 1,002, we'll want to be long with targets at 1,005 and 1,008. If price opens between 996 and 1,000, we'll sit on our hands for now.

Don't forget, if you buy my book Secrets of a Pivot Boss in the month of October, you'll receive a free live webinar in November! Click for Details.

Let's see how this one plays out!

Cheers!

Frank Ochoa PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

RIMM is Ready to Move

Research In Motion, Ltd. (RIMM) has been moving lower within a severe downtrend as of late, paving the way for several "sell the rip" opportunities. However, RIMM is currently coiling at resistance, which indicates a breakout is ahead…but which way?

Double Inside Day

The daily chart shows RIMM has formed a Double Inside Day pattern, or ID2. As you may recall, a double inside day pattern forms when the range of the most recent day falls within the prior day's range AND the range from two days ago falls within the range from three sessions ago.

In essence, Thursday's range was inside Wednesday's range, and Wednesday's range was inside Tuesday's range.

What does this mean? Price is coiling up in anticipation of a breakout with directional conviction.

Of course, it seems the entire market is in a holding pattern until the NFP number comes out, which will likely decide direction and conviction.

Confluence of Resistance

The daily chart shows the ID2 pattern has formed right at 3-month resistance at about $8.40, which also coincides with the monthly R1 Floor pivot.

The fact that this price pattern has formed at this fulcrum means a big move could be ahead, regardless of direction. You see, an upside break through $8.40 leaves clear air above, while another rejection at this level paves the way for another test at the September lows.

Either way, a substantial move could be seen. Let the market decide direction, then execute your plan in the path of least resistance.

Let's see how this one plays out!

By the way, I'm hosting a free market outlook webinar after Tuesday's market. It's always fun to talk shop with others that are passionate about the market, so check it out.

It's free, but space is limited, so make sure you register to reserve your spot. Use this link: http://www.anymeeting.com/PIID=E157DF858249

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

EZPW Bearish Gartley Pattern

A Bearish Gartley Pattern recently completed on Ezcorp (EZPW on NASDAQ.) The XA leg of the Gartley pattern indicates the direction of the trend and the AB=CD symmetry indicates the completion of a correction against the trend. The trade setup was complete on September 14th, 2012 when EZPW traded at 24.55. At this point we would be looking to sell one tick below the low of the September 14th high bar.   

On September 25th, our limit order to sell was hit and EZPW quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out our free introductory video course at at www.geometrictrading.com

 

AAPL is a Buy

Apple, Inc. (AAPL) has been incredibly bullish during the current 4-year rally, offering amazing buying opportunities along the way. The current pull-back could be one of those buying opportunities. Here's why...

Floor Pivot Support

Part of the research I conducted for my book Secrets of a Pivot Boss included pivot-trend analysis. One of the components was how price behaved during trending phases.

One key takeaway from my research was clear - in virtually all strong trending markets price rarely closed below the S1 support level, and mostly never even tested it.

Therefore, if the stock you are trading has remained above the S1 support level for consecutive months, it's likely in a strong bull trend, which means you should be looking to buy into weakness along the way.

Buy the dips.

In the daily chart of AAPL, you see price put in a bullish reversal wick just ahead of October's monthly S1 pivot level, meaning this could be the low for the month.

AAPL has only closed below monthly S1 just once in the last 15 months.

Major Confluence

The daily chart also shows Yesterday's bullish reversal wick candlestick also formed at a 3-way confluence zone that includes the monthly S1 pivot, 5-week visual support, and the 50-day simple moving average.

The market tested the waters below the $655.75 visual support zone, but responsive buyers saw value and bought.

Additionally, the 50-period moving average is a spot where many big players have been known to enter the market during clear trends, which was clearly the case this time around.

It's not a coincidence that the reversal wick formed right at the 50sma, it's first test in over two months.

Buy the Dip

If price remains above the monthly S1 pivot at $646.80, continued uptrending price movement is expected ahead.

If we assume that yesterday's low of $650.65 is the October low, then we can project 5- and 10-day targets of $688.88 and $697.91, respectively, using my ADR Method swing calculations.

Keep in mind, if this is the true point to buy the dip, then much more strength lies ahead, likely toward $750 by the end of November.

Only time will tell.

What are your thoughts? Agree or disagree?

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

5 Reasons the NQ is Headed Lower

The E-Mini NASDAQ 100 was not able to sustain the bullish breakout Monday morning, which led to weakness the rest of the session. Here are five reasons why the NQ is likely headed lower in the days ahead.

1. Rejection at Resistance

Today's intraday rejection at the 2,820 resistance level tells us a lot about where the NQ might be headed in the near term.

The 15-minute chart of the NQ shows price opened the session with initial strength via a gap up and rallied to 2,820 before being rejected at visual resistance and the R2 floor pivot.

Not just rejected…smacked down!

This rejection sent the index into a steady sell-off the rest of the session, which essentially sets up the rest of the reasons on the list. Which brings us to..

2. Failed Inside Day

While the rejection from above is bearish enough, it is amplified when it occurs on the heals of an Inside Day formation. You see, the Inside Day pattern lends itself to major breakouts and follow-through, which didn't occur Monday.

What does this mean? It means initiative bulls did not take the reigns and advance price higher, which is a HUGE tell for the bears.

The fact that the Inside Day pattern was not enough to fuel strength after the initial push higher is indicative of potential weakness ahead.

3. Bearish Outside Day

The daily chart shows the NQ formed a bearish outside day pattern after Monday's session. An outside day pattern develops when the current session's range engulfs the prior day's range.

What makes this outside day pattern more significant is the fact that it opened below the prior day's low, rallied to create a new high above the prior day's high, and then closed back below Friday's low.

Essentially, this price behavior formed a very bearish reversal wick candlestick, which further signifies weakness ahead.

4. Rounded Top

The daily chart also shows that price is currently developing a rounded top pattern, which has been forming over the last four to six weeks.

This type of pattern usually precedes weakness, especially if the NQ remains below the 2,825 level that rejected its advances Monday morning.

5. VPOC at 2,715

Given all of the bearish cues, we'll keep our eye on the 2,715 level as the near term target ahead. Why? Because it's the composite volume profile's Volume Point of Control, which tends to behave as a magnet.

The daily chart shows the 177-day volume profile, which clearly shows the 2,715 level. If price does indeed push lower, look for VPOC to serve as a target for bears looking to cash in on the positions.

The good news? The NQ has trended higher recently, which makes any pull-back to VPOC a buying opportunity. Look for buyers to enter the market 2,715 should a test occur.

If not, we could see tests at 2,670 and 2,635 ahead.

And don't forget, if you buy my book in October, you'll receive a free live webinar by yours truly in November! Read more...

Let's see how this one plays out! Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Inside Day in the E-Mini S&P 500

The chart pattern du jour is the Inside Day, which could make for an exciting beginning to October (and Q4 of 2012!). Here's more…

Inside Day

The daily chart of the E-Mini S&P 500 (ESZ2) shows a clear Inside Day pattern has developed. The Inside Day pattern occurs when the range of the most recent day falls completely within the range from two days ago.

That is, Friday's price range fell completely within the price range from Thursday's market, thereby creating a potentially explosive Inside Day pattern.

Traders love the Inside Day pattern because it is easy to spot, it's development indicates pent-up energy, it tends to lead to big moves, and…it works.

A breakout from the two-day range in the ES could spark a huge move in today's market.

Inside Value

A complementary pattern to the Inside Day formation is the Inside Value setup. The Inside Value pattern develops when the upcoming day's value area falls inside the value area from the prior session.

That is, Monday's value area, as predicted by a Developing Value Area indicator, falls inside the value area from Friday's market.

The 15-minute chart shows the ES has clearly formed this pattern, which has explosive tendencies similar to the Inside Day formation.

Look for a breakout from this pattern to spark a potential Trend Day ahead, especially if price breaks free from Friday's price range.

Narrow Price Range

The recent 3-day price range of the ES also points to potential range expansion ahead. The average 3-day price range has only been 26.50 points, but the current 3-day range is an even slimmer 20.50 points.

Narrow range days typically lead to range expansion, and the current meager 3-day range hints at a breakout move that spark multiple days of expansion ahead.

Watch Friday's price range a breakout in either direction, which could set the tone for October.

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Here's the Dow Game Plan

Now that the Dow Jones ($DJI) got the breakout from the narrow price range we forecasted in our Monday analysis, here's how we'll be playing a potential down move Wednesday.

The Breakout

In Monday's analysis titled Watch the Dow for a Breakout, I wrote that price was coiling for a potential breakout opportunity that could spark the next short term move.

As it turns out, the Dow got a solid downside break through the bottom of the 7-day range at 13,500, which paved the way to a 101-point loss on the day.

The downside break indicates price could be headed to the 13,320 bear target I forecasted in my analysis within 3 to 5 days. Today's Outside Day candlestick pattern further confirms weakness ahead.

Lower Value

Today's downside move, combined with the potential for more downtrending behavior ahead, opens the door to one of my favorite setups - the Lower Value setup.

The 15-minute chart shows the Dow has formed a 2-day Lower Value relationship using the Pivot Range indicator.

The Lower Value relationship develops when the upcoming day's pivot range forms completely lower than the prior day's pivot range. In essence, this relationship indicates continued weakness ahead, especially if Wednesday's Open price confirms the setup.

This is the kind of setup that you can play over and over during a well-behaved trending market.

The Game Plan

If you missed today's move, here's how you can approach tomorrow's market to grab a piece of the action.

Since we have a Lower Value relationship, I'll be looking to sell into any modest strength tomorrow morning, with the intention of riding price to new lows within the current near-term decline, especially if price remains beneath the support-turned-resistance level of 13,520.

If price opens the session below 13,480, look to sell into strength between 13,485 and 13,515. However, if price opens the session above 13,500, look to sell into strength between 13,515 and 13, 540. Look to scale out of your position at the following targets: 13,465, 13,405, and 13,355.

If the $DJI opens the session above 13,540, then market sentiment has clearly shifted and likely means strength ahead. Keep this contingency in mind.

Let's see how this plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss