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January 27, 2005 Morning Comments: I saw a gorgeous trade set up while doing my pre-market work this morning, and I thought I'd highlight it here today. Let's review yesterday's action: Prices gapped higher and ran past the down sloping red Upper Median Line Parallel on the opening bar. They never retraced back lower to give you a low risk long entry point at the retest of the "zoom," so if you wanted in, you had to jump on and hope for the best [Not my type of trade, but many people trade this way and make money]. The first objective for price to the upside was highest gap filler line at roughly 1.3070, which price touched on the third bar. Then price pulled back a little before steadily climbing higher to finally test the red First Warning Line [which is often the best measuring objective] as well as the prior swing high, right at 1.3110. That ended up being the extent of the run higher yesterday, and prices slowly sold off the rest of the day.
Now for today's pre-market set up and how it played out: Prices were trading quite a bit lower before the Thursday morning futures opening, in an area that would be near a test of the confluence Energy Point formed by the blue up sloping Lower Median Line Parallel and the 50 percent retracement of the A-B swing measurement. I measured the Lower Median Line Parallel at 1.3028 and because price failed to make it high enough yesterday to test the blue up sloping Median Line, I felt the opening weakness would at least give me a test of the Lower Median Line Parallel. I put my order in to go long at the opening at 1.3023, with a stop ten ticks below that. As you can see, I wasn't aggressive enough to catch that early morning pop, but you could have easily caught this move by putting your order three ticks above the 50 percent swing retracement, using a three tick violation of the blue Lower Median Line parallel as your stop loss area.
Note that I extended the gap filler line from the past few days over to today's action. That line should serve as a warning area for you to lock in profits if you were aggressive enough to get long on the opening [it was a quick 30 ticks] or at least snug up your stops! And as I finish writing this commentary, price is retracing back down to test the up sloping Lower Median Line, at the morning's lows, so this underlines the importance of solid trade and profit management!
I wish all of you a good trading day!
Act, don't Re-act!
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