Afternoon,

The Russell 2000 e-mini’s trended again today. Even though there was a lot of divergences between the different indexes as the DOW  and the S&P 500 were down all day and the Russell 2000 and the NAZ were up. Normally when that happens, it makes for a difficult trading day. Not today.

I have made one change to my charts today. I have changed the color of the inside vertical bar from pink to black in hopes that it will be easier to identify. I really like the change. Let me know what you think about it.

The market gaped up to the exact level of yesterday’s TS pivot at 13:54 am CST. Some traders might have thought about getting long on a Trader’s trick set up back to the 56 EMA after breaking the trend line from yesterday afternoon pivot trend line.  Because the price had just come down from a double top. There was also another trend line break to the down side but the short entry was above the 56 EMA. So no valid set-ups so far. Here is the chart for those potential trade set-ups.

Potential Initial Trades

Click on chart to enlarge.

Next, I am going to show you a way to use both the internal fib and the external fib areas to help determine how to find a bottom. Here is the chart to help a trader find a bottom.

Finding A Bottom

Click on chart to enlarge.

Take a look at the chart above. Let’s calculate the internal fib area first. Draw a fib from point 1 at the TS pivot at 12:39 pm CST yesterday afternoon to point 2 at the TS pivot at 13:54 pm CST yesterday afternoon. See where that level is. Now let’s look at the external fib area. Draw your fibs from point 3 on the chart at the TS pivot at 14:57 pm CST to  point 4 at the TS Pivot at 8:33 am CST. See where that area is. Notice how close they are to each other. That is called confluence. Confluence is where different fib areas line up. They usually are very strong support/resistance and can point to a bottom/top. The only thing that you need to look for is an entry (inside vertical bar). There was one right after that area at 9:18 am CST with an entry of 730.70. I will go over 1 more confluence area in a few minutes.

The market went up strongly after the inside vertical bar from above then turned around and went down sharply creating a bobber set-upat 9:48 am CST with an entry of 731.00. A bobber set-up does not have to have a trend line break to be valid. Also, and the 56 EMA is not important on a bobber set-up. Here is the chart for trade 1

Trade 1

Click on chart to enlarge.

Before we get to the next set-up, I want to show you another fib confluence area. Here is the chart.

Confluence

Click on chart to enlarge.

Take a look at the above chart.  Draw the fibs from point 1 TS pivot at 10:06 am CST to the point 2 at the TS pivot 11:36 pm CST. Notice where the 50% fib area is. Now draw the fibs from point 3 at the TS pivot at 10:42 am CST to the TS pivot at point 2 at 11:36 am CST. Notice where the 61% fib area is. See how those areas are very close together. That give a trader a better feel that area will be defended.

The next trade  happened right after that area formed. There was a trend line break followed by a trader’s trick set up right at the 56 EMA with an time of 12:21 pm CST with an entry of 731.90. Here is the chart for trade 2.

Trade 2

Click on chart to enlarge.

The next trade was a break of the 1st hour high followed by a trader’s trick set-up. The trade time was 13:00 pm CST and the entry was 735.10.  The price ran right up to the 127% fib area and stopped. Knowing that the 127% fib area is strong resistance, a trader would have exited the trade below the big red bar after hitting the 127% area. The exit would have been at 13:12 pm CST with an exit price of 734.90 for a small low of .20 points. The price came down to the 1st hour high and a 40% support fib area as measured from the TS pivot at 12:21 pm CST to the TS pivot at 13:09 pm CST. That is two strong support areas. That was followed by a inside vertical bar at 13:33 pm CST with an entry of 734.70. The next trade set-up was a trend line break above the 56 EMA followed by a trader’s trick set up. The time of the trade was 13:45 pm CST with an entry price of 735.30. Notice how price was shut down by the 161% fib area. Not  noted on the chart but after the 161% fib area, there was a inside vertical bar. The market shot down from that area. Don’t you love those inside vertical bars. Here is the chart for trades 3 and 4.

Trades 3 and 4

Click on chart to enlarge.

So again another nice fishing day. There were 4 valid set-ups with 3 winning trades and 1 small loss of .20 points for a net profit of $580, ignoring slippage and commissions.

I am still not including the inside vertical bar set-ups in the totals as I don’t have the profit objectives and stops in place yet. Because the inside vertical bars are counter trend trades, the entries are much better than you get using the entries taught on my blog. Those strategies are designed to entry an existing trend. One final thought about inside vertical bars. A trader should not take inside vertical bars indiscrimantly. In other words, inside vertical bar trades should be taken in conjunction with a strong support/ resistance areas as outlined above.

I hope that you are enjoying the new charting format. Let me hear from you.

Happy fishing!

Best regards,

Ron

This is not a solicitation to buy or sell. 
There is a risk in any investment.