Lunch Volume

Back from lunch. WE are still getting some lower lunchtime volume. I am also listening to pit audio and things still see quiet. Let’s give this thing another 30 minutes and revisit it then. I expected the next 30 minutes to get choppy then volume should come back and we can start looking to make some cash.

A Sweet Triangle

Looking at this 3 minute chart of the YM contract right around fed time today. What I want to point out is actually the setup that occurred about 30 minutes after the 2:15 info. I like to watch  how the market goes into and acts around the 3:00 EST time after the fed.  During the announcement I was looking at the bonds and noticing how they showed strength around the number. Yes they pulled down but the follow through was to the long side. SO this was the first signal of overall market sentiment. Then we saw the bulls try to push forward again around 2:45. You can see this on the chart by those green candles, but notice the long wicks showing us rejection. Thats another bearish sign. Then the market consolidates into a perfect triangle pattern. When it breaks with good volume to the downside of the triangle thats a clear signal to look at a smaller time frame and get on a pullback. So basically you get three signs confirming the move. At that point you go with it.

Notice also that the lines drawn on the chart had been drawn before the open. They are key levels from the overnight session. See how well they where respected on the move down. These would be great targets to take some profits on the move as it progressed down.

The First Hour Of Trade

All of the signs we have been discussing over the last few weeks have signal for this mornings sell off. The 3 minute shows failure, the break below the open price with interested sellers and so on. So hopefully everyone got some out of the move. My target was down at 12800, one tick above an untested The YM. The futures postion I would take profits at this point and go flat but I am still long the QID and thinking about hedging that position and letting it play out the rest of the day.

I want to touch on something I mentioned yesterday that is part of my trade plan. It’s that first hour of trade. Recall I mentioned I don’t like to jump aboard a trend at 10:30. Well the chart below shows again why this is. Notice how once we hit that time the momentum really dies. At that point I wait a little bit for a new setup and sentiment to occur.

The 3 Minute Chart

The QID trade hit our target and even continued in our favor. I think this is a good point to discuss how important it is for me to look at others charts besides just the one I am trading. In this afternoons case the 3 minute YM chart brought me a good amount of information that gave me the confidence to hold the QID trade into the close. So what tipped me off to this short. Well first it was price and volume. If you look at the blue box area on the chart we see volume swells on the down push and dies out on the up moves. That’s sign number one. In the blue box we also fail to make a higher high. Then we are watching close the 13 period moving average as a sort of line in the sand number. We see it get broken to the downside and volume comes in heavy on the move. This is sign number two. Then on the QID chart we see volume and price action break above it’s recent swing high and away we go taking the short.

If you followed me in the morning action chat, we noted the 12885 being a very key level today. In fact it still is a key level as we closed right at it. Anyway once price on the YM was below the 885 level I had no fear in holding the QID long . If YM got above the 885, with interest then I would take profits on QID and go flat.

So you can see it’s not just the one chart of QID I am watching even tho that’s where the trade was placed. In fact I actually am watching the futures and bonds at the same time. If you think about it it makes sense since the market sentiment should be universal. If you see a two charts that should be moving together not doing so, it’s a good sign the signal your getting is weak and it’s best to sit on the sidelines until they sync up again.