Posted on June 12th, 2009 at 12:30 PM
Oil update
I posted some levels to watch on oil here. Since that blog post oil has steadily moved up. It is now getting ready to challenge the next level up and I look for resistance to come in at this angle around $71.70. Below is the updated chart of weekly oil.
Good Trading
Craig Russell
Posted on June 12th, 2009 at 12:30 PM
As we begin a new week of trading in Forex I'll take my usual look at the US Dollar Index before looking at individual trades. As I've mentioned before I like to get a general idea of what direction the US Dollar is moving before I start looking to trade on currencies such as the Euro or Pound.
As I look at the current chart of the US Dollar Index I see that we may be at the bottom of a Wave 3 decline and the Wave 4 retracement may be starting. The normal retracement range of a Wave 4 is between 38.2% and 61.8% which gives us a range from .8250 to .8516. While the US Dollar is in this retracement we should see some short term declines on the Euro and Pound and therefore my bias will be to look for shorts on these markets. If the US Dollar does get to these levels I will begin to look for Wave 5 lows on the shorter time frame charts (60,180, and 240 minute) of the Euro and Pound which could indicate the end of the profit taking rally on the dollar.
Ron Wheeler
Posted on June 12th, 2009 at 1:00 PM
Last week in mentoring, we were taking about how to take partial profits. Learning to do this well takes a little practice, but that time can pay dividends when it comes to trades that are moving in your favor.
There are two techniques that I use for taking partial profits. The first is by using the 50% rule. Any trade that moves at least 50% from my entry to my target is at a good level at which I am willing to reduce my exposure and put some money in the bank.
Our goal as traders is to be good managers of risk. Through good risk management, the money will simply be a byproduct.
In the example below, I'm looking at a 60 minute chart of LXK. The first example is using the 50% level from the entry to the highest level of the MOB. In the second example, I am using an alternate technique which involves drawing an ellipse to help isolate an area where the price action could falter on the way to the MOB. Which ever method you prefer, it is critical to good trading to go risk free as soon as the market gives you an opportunity.
Ideally, we want to see this thing move to the MOB, but by strategically taking some profits off the table, we are able to reduce our exposure in case things don't work out as expected. When this type of behavior is practiced, we can still profit from trades that don't meet our target or officially "fail". Trade Smart
~Duane Gott
Posted on June 12th, 2009 at 1:00 PM
As I mentioned in my last post on currencies:
http://ragingbull.quote.com/bullseye/node/1424
I am bearish on the Euro and Pound for the short term due to the profit taking rally on the daily USD Index.
On the 60 minute chart of the Euro we have a classic False Bar Stochastic Sell. The trigger is simply a Regression Trend Channel drawn from the low bar at 5:00AM ET to the retracement high at 7:00PM ET. The entry is the break at 10PM ET bar near the price of 1.3900. Our stop is placed above the retracement high at 1.3940. Using a Gann Box my first profit target is at 1.3860 and a limit buy order can be placed there for profit taking. The ultimate goal for this trade is to take out the low and hit the MOB at 1.3780 which is scaled off the screen.
I will update as the trade progresses...
Ron Wheeler
Posted on June 12th, 2009 at 1:30 PM
Here is a link to the original post I made just under an hour ago:
http://ragingbull.quote.com/bullseye/node/1429
The Euro has hit my first target of 1.3860 and initial profits are now taken on the trade. Your new stop should be placed at the original entry. Typically, I like to have 3 profit targets set on all my trades. The first one was the Gann Level we just hit the third and last level is the MOB. For the second target I have to get a little creative as we have no Gann Level between our current price and the MOB. In this case I am going to simply split the difference between my first target of 1.3860 and our target of 1.3772, this give me my next target of 1.3815 where I can place my next limit buy order for profit taking. My typical profit taking strategy has me taking 1/3 profits at the first target, 1/3 at the second and the final 1/3 at the MOB. But this can always be adjusted depending on the time the trade is taking to hit my targets.
In a perfect world we would have 2 Gann Levels for targets followed by the MOB for our last target. However, we don't always get the perfect world and sometimes we have to improvise our targets.
If you haven't read Duane Gott's entry about profit taking, take the time to read it as he outlines a good partial profit taking strategy and also explains why stepping out of your trades is the preferred method. Below is the link to his entry.
http://ragingbull.quote.com/bullseye/node/1427
Ron Wheeler
Posted on June 12th, 2009 at 2:00 PM
Stops were taken out on the Euro last night (around 2:00AM) but it still left a modest profit to be made if you would have taken profits at the Gann Levels we talked about. The Euro is still in a False Bar Stochastic Sell and a new sell can be taken if we cross below the new Regression Trend Channels drawn from the latest pivot low (6:00AM ET) to the current high. The max retracement is the 61.8% which is 1.4089, if we move past that price I will no longer look to go short the Euro and it may indicate the daily USD is not ready for the full Wave 4 retracement and we should resume our bearish outlook on the USD.
Ron Wheeler
Posted on June 12th, 2009 at 2:30 PM
It pays to attend the Advanced GET / eSignal Learning Mentoring sessions......literally.
During Tuesday nights mentoring session, we were taking a look at the daily chart of JACK. With the current Wave 5 high, MOB resistance and clear cut divergence in the Advanced GET Oscillator, it met all the parameters for a beautiful counter-trend trade.
Over the last three days, the counter trend setup has played out beautifully and we are now at an area where it is good to take a little money off the table. Using a Regression Trend Channel and the 50% Fibonacci level, we can now reduce the position size and limit our exposure. This partial profit taking approach can help maintain profitability while accuracy sits shotgun. Always pay yourself for a job well done!
Trade Smart......Duane Gott
