[File Auto Train Uieu Scale Garni Options

GET Coowriciht <c> 1^88 v2.5 F1 = Heirs Stochastic

Sep Oct Nov Dec

TBAHTlQ TBflQQQ Tuesdoa '12/13/88 SGI 5 , BUnl/ii IKO^Oy Ooens S5S1 Hish- 3821 Low- 5S12 Close- SS15 Osc:


RZtf - 8718 sn2q

811(5 28108 8H00 8C2H 861G 8608 8600 852H 851S 8508 8500 8M2M

100 15 50 25 0

You've completed your first trade:

Bought on 12/1/88 Total Points

$1056.25 profit in 7 trading days!

Previous profit balance Profit from Trade 1 Current profit balance

$1056.25 $1056.25

You'll later read that "the trend is your friend." The trend is up. Therefore, take only long positions.

On 12/12 and 12/13, prices churn around the previous RZH of8820. On 12/ 14, stochastics have crossed to the downside. Prices have fallen on that day and close at 8719, that price also being the low of the day. (Another coincidence; our RZH is 8717).

Prices closing at 8719 are under the 45-degree line, Bl, from the previous minor reaction point on 12/2 at a low of 8620. Stochastics crossing, even in the neutral zone, may normally be a sign of lower prices.

Prices are at the RZH of 8717. Remember, the RZH is the 50% retracement level, at which Gann said prices would react. The RZL is 63% and allows some margin for fundamental influences on prices.

A reaction to the upside could be anticipated. There is not enough profit potential here to take a short position. The overall trend is up; therefore, only long positions should be considered. Wait for a confirmation of an uptrend and go long.

A new uptrend is confirmed on 12/19. Prices have opened AND closed over LI from P2. At the same time, stochastics have turned up. This is a good place to go long, with a potential target of 8924-9000. That price range is a 100% re tracement from 10/31 and 11/1.

On 12/20, you're long at the opening of 8818. A stop is placed at 8800 (the 45-degree line, B2, from the 12/15 low of 8716, crossing 12/20). This risk is about $600.

i5iBQTÛ«)©Jt3roQTe©0TÔ«)OTâilO0T © in © in © <n©sipjcï©ispjrt©©i\]rt©©pj*-i©©pjrt©©pj © r in pj ©©©rrrr<D®i»corrrröii>öisininininT

IT D" r iß iß «0 <0 i» iß iß © iß iß (0 «0 iß 00 CO (0 © iß «o i» ©

From the 12/15 low of 8716, 45-degree and 63-degree stop-loss lines are drawn. Prices stabilize for two days, reacting back to the 63-degree line. You determine that the 45-degree line, rather than the 63-degree line, will be used for stops.

Prices gap to the upside. Because of this price jump, the angle for determining stops is changed from 45-degrees to 63-degrees. A stop for 12/23 is placed at 8824 - where 12/22 crosses the angle. On 12/23, stochastics have crossed 80 and begin to turn. This is a sign of a possible change in trend.

On 12/23 you place a stop at 8904 - again where the 63-degree angle crosses 12/23 - for trading on 12/27. Tight stops should be used because of an anticipated change of trend indicated by stochastics.

On 12/27, you're stopped out at 8904. (The open and high of 12/27 was 8907 — pin-point accuracy!)

Stochastics turning in the over-80 zone is an indication of a possible move to the downside. There are now two clear major turning points to establish the next Retracement Zone, based on the stochastic activity.

The low of 11/22 at 8600, when stochastics crossed under 20, is PI. The recent high of 12/23 at 8916, when stochastics crossed over 80, is P2. P3 is on 12/ 23 at the 8600 level. The resulting RZH is 8724 and the RZL is 8704.

On 12/29, prices have closed under LI from 12/23 and stochastics have crossed 80 to the downside. The market could be shorted on the next day's opening, with a stop at 8827 - the LI level for that day.

This Retracement Zone could be a major area of resistance. If you calculate the Retracement Zones for early-December, late-October-to-mid-November, and mid-October, you will see they are all at about the same price levels. (Gann's rule held that there is strong resistance or support at a price level where two 50% Retracement Zones occur.)

Both prices and stochastics seem to be in an uptrend. The RZH level of8724 is the same level (100%) from which prices rebounded on 12/15. Rather than chipping away to take small profits, consider using the 8724 level as a buying opportunity.

TRADE 2: Sold on 12/27

Bought on 12/20 Total Points

$462.50 profit in 4 days.

Previous profit balance Profit from Trade 2 Current profit balance

Was this article helpful?

0 0

Post a comment