COTTON

This is another market that is setup for a decline. The short entry was at the red line with a stop above the highest high point by 1 tick. Again notice the heavy short position by the commercials and heavy long by the small specs. This by itself is not a lead pipe cinch, but it is a good starting point for an entry.

Some of the internals have not diverged yet which would make this a better setup, but it is good enough without them to take a shot. This is not a mechanical approach like many that I use, but the reality is that some discretion or judgement has to be used to trade profitably. If you can establish a basic structure that is somewhat mechanical, you can then use your experience to fine tune how you get in and out.

I do want to stress though, that it is imperative to establish how you will exit a trade before you enter it. This will help eliminate the emotional tugs on you that will develop as the trade progresses.