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| February 15, 2005 Comments: The Euro FX futures gapped open higher, continuing their higher run from the third test of the multi-bottoms on February 10. We left a gap behind, then consolidated a bit, and now gapped open higher again this morning, right into the overhead resistance formed by the Rail Road Track spike high on February 4, and near the blue up sloping Median Line Parallel. Note that price did not make it high enough to test the Upper Median Line Parallel, and until it does, you can invoke Hagopian’s Rule, so IF price climbs back up in the next few bars to re-test the Rail Road Track spike high level again, we’ll get short there, with a stop three ticks above the high of this morning’s first bar. |
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| Two bars later, we get filled on our order and we’re short Euro FX futures at 130.48. We’ll set our stop, as I said, at three ticks over the high of the first bar, at 130.60. Where is our initial target to the downside? If price had tested the Upper Median Line Parallel, I’d be looking to take profits at the Median Line, but since it failed to do so, I expect it will have more down side energy to expend than normal, so I’ll look to take profits three ticks above the up sloping Lower Median Line Parallel., at 129.88. And IF we get through the Median Line without before we get stopped out of our position, we will snug our stops first down to break even and then we’ll keep moving them lower as price allows to lock in profits. Let’s see how this trade unfolds: |
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| We are soon able to snug our stops to break even and after a handful of bars, our profit order gets filled at 129.88. |
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I actually contemplated attempting a long position as price approached the "Gap Filler" line, but price doesn't get quite low enough to approach what I consider a good risk reward area. As it begins to climb higher, I erase the up sloping Median Line I had been using and draw in a new one, using this new low as the lowest pivot As you can see, price worked its way higher the rest of the day.
I wish you all good trading!
Act, don't Re-act! |
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