Tuesday, 5 April 2011

(UPDATE) Emini S&P 15min wedge

I see a clear consolidation building here in the S&P Eminis. We are possibly finishing off the "e" leg of a triangle which implies a breakout coming into the contract highs in the 40s. Wait for price to thrust out of this support level before getting long. However, like every pattern, we must be prepared for these classic setups to fail as these are often stronger signals. Breaks of 1324/1325 to the downside are bearish and get short. Note that yesterday was an Inside Day on the cash market. Expect a break either way tonight.

Emini S&P June 15mins:

(UPDATE) I thought I would follow up on the outcome of the Emini pattern shown last night. I think this is a great example of failed patterns and how a trader needs to be completely flexbile to be successful.

We saw a breakdown of the low end of the pattern during European trade. There was no follow through to the downside and thus immeadiatly we should be looking to get long if price regains support. Failed patterns are often very strong signals as the crowd has traded on the perceived breakdown, and are then forced to cover their postions adding fuel to the subsequent rally. Personally, I never trade the Eminis BEFORE the Cash market open. This pattern here is a clear illustration of why- there are many false breaks and moves prior to the US opening.

We did see a thrust out of the 1324/1325 support level when the US stepped in and this was the initial signal to get long. Look for a strong 5min or 15min candle. There was an opportunity to add another postion when price broke above the downward trendline. However, there was no strong follow through and price failed right at the previous highs at the 1333/1334 res level. Nimble traders could have made a small profit but all in all this was rather a volatile session.

Emini 15mins:

Emini 5mins:

Nikkei June Short

I thought I would show a  trade I just executed in the Nikkei June futures. This is not a reccomendation to trade but just an illustration of my thinking. 

I have been following a potential short setup for some while in the Nikkei: http://swingtradersedge.blogspot.com/2011/03/nikkei-vs-s-flash-crash.html. Price did rally into the 9750/9800 target level I cited some days ago i.e. the open gap and 61.8 retrace level. In the last 3 days, this market has traded in a clear distribution range and has failed to move higher. I got short on a breakdown of the recent range (see 5min chart). Inital targets are 9350 with stops above 9770.

Nikkei June 5mins:
Got short at 9640 on the retest of this mornings breakdown level.

Nikkei 15mins:

Nikkei 60mins:
Price has rallied right into the open gap. Momentum divergences are appearing. The moving averages are still positive on this timeframe and thus we must be wary if there is no follow through to the downside. Note that the Daily trend is down and we are shorting the market into the moving averages.

I will keep you posted on how this plays out.

Asian Morning Thoughts

Morning All,

The SPI futures have opened at 4918 just short of yesterdays highs at 4922. Once again, I must stress that I don't have a clear trade here. I believe we are at the top end of the range and I am happy to be out of the market at these levels. Certainly yesterday's price action did feel tired but there is no clear distribution pattern yet. Patience is a key quality of a successful trader I believe and until I see a solid risk/reward setup, I will not risk my capital. Loner term, I am looking for a deeper pullback into the Daily moving averages to get long once more but here I advise caution.

I think today could be a range type day. Scenarios I am following
i) Potentially fade at 4922/4925 targeting 4905. If this res level lifts, look for potential breakout trades targeting 4940+ (target the ASX200 February high)
ii) Buy support at 4902/4900. Look to play a potential range. This level is a key marker for the short term bullish scenario.

The Australian sector indices are trading right into meaningful resistance levels. I am not calling a top here as the underlying momentum is strong, but I do believe we are certainly at the top end of the range. Always think risk/reward. Ask yourself, does it make sense to be long the market coming into these levels as a trader?

Energy Sector Daily:
This is a potential Double Top pattern in the making. Needs a bearish reversal candle to confirm. Either way, we are at solid resistance and this is NOT a breakout trade given the lack of consolidation.

Financials Sector Daily:
The Financials are now retesting the top end of this broad range. The last breakout was strongly rejected.

Materials Sector 60mins:
The materials sector is now right back to its previous highs. This is resistance

Therefore, I advise caution here in Australia. We are trading at resistance levels and we must respect this as traders. Look for either short term topping patterns to get short or wait for longer term consolidation patterns to join this trend for a new swing up. Sentiment is once again getting very bullish and I can see a number of bullish recommendations flying around. Be careful in these situations.

The Nikkei is trading at the key 9700 support. Price has failed at 9800 right at the open gap. The Daily chart has left 2 consecutive indecision candles right at the downward moving averages. I am looking to get short on breaks of this range. I outlined this trade here several days ago:http://swingtradersedge.blogspot.com/2011/03/asia-top-setups.html AND http://swingtradersedge.blogspot.com/2011/03/nikkei-vs-s-flash-crash.html

Nikkei 15mins June:

The Nifty continues to move higher from the strong base pattern. Yesterday we saw a strong close above the 61.8 retrace level. A small downward trendline comes in at 6000 and this looks like a short term target. I believe traders should continue to look for setups to join this strong trend.

Nifty Continuous Daily:


The Hang Seng closed solidly above the downward trendline I have been monitoring. Note the strength we have seen since that failed breakdown of horizontal support. In the short term, the market seems a bit overextended and I would be wary of jumping in here despite yesterdays close.

Hang Seng Daily: