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Tuesday, May 18, 2010
SWEET SCIENCE PART DEUX
A few weeks ago I mentioned the Sugar market and showed a very nice long side trade I made, where I was lucky enough to do the Bill Murray Caddyshack exit, and duck out right before the fireworks went off. This market had a bounce, then resumed it's downtrend and I was thankful to have taken about 15k on the long side of a trade that turned out to just be a counter trend scalp. I did not intend for it to be that when I entered it, it just worked out that way. You have to read what is happening on a daily basis, there is no way around it if you are serious about trading. Once it was clear to me that the small upmove I was riding was not a trend reversal, I looked for the exit sign. When trading reversal patterns, you will never know upon entering when a trend reversal is at hand. You just have to honor your risk parameters and let the trade develop. It usually becomes clear quickly if it is just a retracement move or something more.
This market is now setup again for a possible trend reversal and move to the upside. You can see where I have my orders placed to go long here. Will I get filled? Who knows. Price is trading up today but not far enough yet to drag me in. I like the way the trend/momentum indicators here are leading the price. Larry Williams forecast still has a low to be occuring about now give or take for a move up, so there is a longer term cyclical influence that could exert itself here as well.
The Bond trade I mentioned yesterday was not triggerred and is now giving us a potential inside day with an up close, which does set up nicely for a sell tommorrow if we hold where we are. The cross currents in the markets are very choppy right here and I have to admit to not having a steady read on where things are going this week. I usually have a good feel or expectation even when incorrect, of what I think will happen. I just cannot get a consistent handle on the reads my momentum indicators are giving me here. This is why I do not have the number of trades I normally would have going right now. You are never sure in this business, but you damn well better have conviction in your trades, or you are sure to mess them up.
I have how the indicators will look if we close where we are currently trading right now in Bonds. You can see this up move does not change the trend to up. This tells me I can short a rally against a downtrend in momentum. I am not in love with this trade per se because I would prefer there to be some accumulation/distribution divergence ( Green Line ), to also be present. However, we cannot always have everything, and this has enough without that to be worth taking a swing at. If equities fly up and out of here which is what I am leaning towards now, this market will likely move down. I do not make trades based on that observation, it is just that, an observation about market correlations.