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October 28, 2005 Morning Comments: This weekend I'd like to point out the importance of context when looking at pre-opening market charts and looking for potential trade set ups. You can make good money trading and not be particularly good at reading context, but to regularly catch the large moves that occur during a few days a week, you will find that context plays a key role. And the better you are at reading the context of the market about to open, the more consistently you'll find yourself catching the big moves when they do happen.

Looking at the two pre-opening charts, above, you can see that I highlighted three Energy Points, one at 1183 1/4, one at 1183 3/4 and another at 1193 3/4. I pointed out that in the larger scheme of things, the red Median Line Set has been "in control," although price has played a little "loose" around it, especially at and above the red Median Line. And then I pointed out that price was likely going to gap open higher anywhere from 3 to 5 S&P points higher. Yesterday, price broke below and closed below the red up sloping Lower Median Line Parallel, so an open above the red Lower Median Line Parallel should be considered a zoom bar higher. IF the first bar opens above the red Lower Median Line Parallel AND closes above it with "good separation [1 to 1 1/2 S&P points is good in my book], I'll consider it a quality zoom bar higher. Both the gap open higher and the zoom bar higher would be signs of strength--especially if price was then able to stay above the red up sloping Median Line Parallel and IF it was unable to fill the potentially open gap at 1182 1/2.

On the longer-term pre-opening chart, I mused that price had made four higher highs, all above the red up sloping Median Line. IF price gapped open higher, back above the red up sloping Lower Median Line Parallel, would it also now make a fourth higher low?

The one thing I didn't mark clearly on the two pre-opening charts that I DID point out was that we had two Energy Points below where the market was likely to open, and the proximity of these two Energy Points made me think price would be drawn to them like iron to a magnet. And note that the lower of the two was formed by the Major green Upper Median Line Parallel [the Median Line Set I've been calling "golden," since it game me 11 of 12 nice sized profitable trades in the past two weeks] and its intersection with the red Lower Median Line Parallel--so, this Energy Point is really the meeting of the "old and the new" or to put it another way, the meeting of the Major Median Line set that WAS in control and the Major Median Line set that now IS in control. And remember Dr. Andrews fifth tenet that price will reverse off prior Median Lines or their Parallels, so watch this Energy Point especially closely as price unfolds.

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Price did gap open higher and the first bar accelerated to the upside, giving me a very nice Zoom Bar higher to work with, at least in the setting of the context for the day. Price made one more bar higher and then traders began to wonder about the open gap below the market. Suddenly you could feel them pushing it lower, as the attraction of those two Energy Points below the market [at 1183 3/4 and 1183 1/4] began to exert their force on the market. It was at this point that I saw the trade set up I'd like to trade:

IF price traded to the lower Energy Point, where the two Major Opposing Median Line sets intersected, I'd be a buyer. I entered a limit order to get long at 1183 1/4. My initial stop loss would be one full point below yesterday's 1180 3/4 low, at 1179 3/4 [because I like to stay away from "even" numbers when possible]. My profit target for the first half of the position would be at the overhead 1193 3/4 Energy Point, so I'd be risking 3 1/2 S&P points to make a potential 10 1/2 S&P points, which gives me a risk reward ratio of 3 on the first half. The one caveat on this trade set up is that 3 1/2 points is about as large a stop as I use in the S&Ps, because I *never* take a trade with a risk reward ratio less than two and it's difficult to consistently make seven S&P handles a day...so I was only willing to stretch this far on this trade because it is an Energy Point formed by two Major Median Line sets that have been in total control of this market.

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Price made one more new low and then climbed out of the hole, heading straight for the Energy Point at 1193 3/4, and although price got to the level before "time," I still took the profit on 1/2 the position as planned--though the early arrival of price at the Energy Point probably boded well for further upward momentum. As soon as my profit target was hit on half the position, I moved my initial stop loss order to break even and of course, changed the size to reflect the 1/2 I had already taken off at a nice profit.

You'll see the off-hannded remark I placed on the chart, one I hear two of my trading partners use when price is just hitting the lines perfectly: "It's gonna go red to red!" they'd say...

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Price backed off a bit lower from the 1193 3/4 Energy Point and formed an Energy Coil, re-storing its expended directional energy, before taking off to the up side again. Once price made a new high, I moved my break even stop to three ticks below this 1190 1/2 swing low, at 1189 3/4. Price then sprinted higher, heading right for the red Median Line ["Red to Red!" as Andy and the Mayor would say...]. At 2 pm CST, I entered a MOC stop order, because I didn't want this trade to turn into an overnight trade if both my stop profit and profit orders weren't filled by the close. And as 3 pm CST rolled around, I finally took profits on the remaining 1/2 position at 1200 1/2 and then cancelled my remaining orders.

I booked 10 1/2 S&P points [$525 per contract] on 1/2 the position and 17 1/4 S&P points [$862.50 per contract] on the remaining half. It was a great way to end a very fun trading week.

I am about ready to open up seminars to people via the internet. IF you are interested in the full length seminars that I have been teaching to both the CME floor traders and CBOT floor traders, please email me and let me know. I'll then decide how often to give them and what times to give them based on the people that respond and what time zones they live in.

We are in the process of building a sister site in concert with eSignal, and we'll be making announcements, posting charts and articles and webinar replays there. It may take us a week or two to finish building the area there, but you can find the area at:

Market Maps with Timothy Morge at eSignalcentral.com

[Look under the third party developer and studies area]


I'll be back in the office downtown Monday and as soon as I get in, I'll open the multimedia room. You're all free to drop by and watch me draw up pre-opening charts. I generally get there between 6:30 and 6:45 am CST. If you're interested, you can enter the private room, watch, ask questions once the markets open, and see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I may open the room once I get downtown. If you beat me there, the room may be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people. I found the problem with my stealth settings--I had "frozen" the lines [told them to stop drawing new lines automatically] before I left for a meeting and forgotten to "unfreeze" them...so they'll be more interesting to watch again Monday.

I wish you all good trading!

Tim

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October 27, 2005 Morning Comments: I know that some of you are signing in "live," via the link mentioned below, and watching me draw and rock the pre-market charts. At the moment, we are only allowing traders that have accounts with Spike to hear the pre-opening comments and get the variables that are used with Autoforks to set up the charts you see me rock live in the morning. We may continue to keep that as the policy or if there is enough interest, we may make the availability of the Autoforks variables and pre-opening charts and live commentary part of an inexpensive subscription package. At this point, we'll wait to see if anyone expresses any real interest--if not, we'll keep it "in-house" for traders that have taken the seminars and trade through Spike.

Before the opening, I noted with interest that we were likely to gap open lower and that is generally a sign of weakness--especially if the gap filler line is not filled. I then identified two Energy Points [Energy Points are where two or more lines of Opposing Force meet], one at 1201 and another at 1190 1/2. It is my experience that these Energy Points tend to attract price like a magnet, so IF price indeed gaps open lower and doesn't fill the gap, price should be heading to a test of the Energy Point at 1190 1/2, where the true direction of the day will likely be decided, depending on whether price a) Congests or forms an Energy Coil; b) Reverses; or C) Accelerates once it gets to that area.

If the second chart confuses you, don't worry. It's only there to give you perspective and context of the major lines drawn that MAY come into play. You can trade the trade set ups without being comfortable watching so many lines--in fact, it's generally ONE of these lines that will determine the entry, but since I am setting up lines well before the open to serve as a frame work for other traders to use as "Market Maps," there generally needs to be a "big picture" set and a more "zoomed in" view. Some people need to know both to feel comfortable and some will only look at the "zoomed in" view."

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Price did gap open lower and failed to climb high enough to fill the "gap filler line," which came in at 1196 this morning. This is a sign of weakness and set the tone for the rest of the day. Once price clearly zoomed down through the blue down sloping Median Line and was testing the pink Median Line, I wanted to find a short trade entry set up that had a solid risk reward ratio and an acceptable stop loss. Here's what I found:

I wanted to sell the re-test of the just-zoomed blue Median Line at 1192, with an initial stop loss three ticks above the 1193 3/4 double tops at 1194 1/2. And IF price filled my entry order, my profit target would be a test of the red up sloping Lower Median Line Parallel at 1183. That meant I was risking 2 1/2 S&P handles to make 9 S&P handles per contract, which is a risk reward ratio of 3.6, which is very respectable. And those of you that read this page regularly know that this entry set up carries a very high probability of success--roughly 77 percent.

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Price made one more new low and then climbed out of the hole, climbing back above the blue down sloping Median Line briefly and filling my limit sell order at 1192 before closing back below the blue Median Line. Once I got confirmation from the CME server that I my sell order was filled, I double checked that my stop loss order was still in the market and then I entered my profit order at 1183.

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Once I was short, you can see that price stair stepped its way lower and when price took out the low of an Energy Coil, I moved my initial stop at 1194 1/2 down to a profit stop three ticks above the 1189 3/4 mini-swing high, to 1190 1/2. And though I don't show it on these charts, at 2 pm CST, I entered a "MOC" stop order, which means that if both my profit order AND my stop order remained unfilled at the close, I would be stopped out at the settlement price. I generally use these orders just to make certain that a day trade doesn't turn into an overnight trade should I get side tracked with business or have to go attend to something unforeseen with my little ones, etc.

Just about the time I was putting in my MOC stop order, price ran down and tested the Lower Median Line Parallel, filling my profit order at 1183. Once I got confirmation my profit order was filled from the CME server, I double checked that all my orders were cancelled and that I sold and bought an even number of contracts.

This was a nice clean trade that netted 9 E*Mini S&P handles, which is $450 per contract before brokerage. It was a classic zoom and re-test entry and I never took any real "heat" in this trade--price simply eroded all day long, so the key was finding a high-probability entry area to get short with an acceptable stop order.

We are in the process of building a sister site in concert with eSignal, and we'll be making announcements, posting charts and articles and webinar replays there. It may take us a week or two to finish building the area there, but you can find the area at:

Market Maps with Timothy Morge at eSignalcentral.com

[Look under the third party developer and studies area]


I'll be back in the office downtown tomorrow and as soon as I get in, I'll open the multimedia room. You're all free to drop by and watch me draw up pre-opening charts. I generally get there between 6:30 and 6:45 am CST. If you're interested, you can enter the private room, watch, ask questions once the markets open, and see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I may open the room once I get downtown. If you beat me there, the room may be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people. Tomorrow is a refresher day for me, so even if I do take questions, I won't be available for a very long time. But I'll give you what time I have...

I wish you all good trading!

Tim

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October 25, 2005 Morning Comments: First some unfinished business from yesterday's update: I was long Canadian Dollars, looking to add to the position on a pullback OR looking to exit this leg of the position IF price tested the Major Median Line at 8498. I was filled on my profit order at 8498 in the first hour or so of trading, for a nice profit of 94 ticks, which is $940 per contract, a nice piece of work while I slept soundly. Now on to today's new trade:

Ok, some of you are going to scratch your heads and wonder...Lean Hogs? What in the heck is he doing? Is he going to show us a Frozen Orange Juice futures trade next? I chart and trade roughly 25 commodities and cash currencies and I portfolio trade them on a regular basis, meaning I make trades in them when I see something interesting. In the Lean Hogs, I booked well over five handles on the down side just this past week, so when I saw a nice potential buy set up, I was more than willing to attempt the trade, if price allowed me to find a trade set up with good a risk reward ratio and acceptable money management. And by the way, there are more than stock index futures markets to trade--but don't tell anyone, because they aren't always as difficult to trade as the index futures, because the competition is not quite so fierce...Now let me tell you what I saw before the market opened:

When doing my pre-opening chart work, which I posted at our sister web site this morning at:

Market Maps with Timothy Morge at eSignalcentral.com

[Look under the third party developer and studies area]

I noticed three Energy Points [or lines of opposing force] in the Lean Hogs market that might come into play today. I marked all three on the charts I passed to the seminar traders, but frankly, until the market opened, it would be near impossible to tell which would come into play. I DID point out that the fall from nearly 66 cents in the hogs down to just below 60 cents came in a vertical pattern--a Chimney formation--and these formations are called Chimney formations because the way out is usually the reverse of the way in, so in this case, there is a chance we might see at least a part of a run higher that comes just as fast as the fall did. So in the back of my mind, after seeing the multiple bottoms formed around the 60 cent area, I was leaning towards a long position IF the risk reward AND money management fell into place

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Eyeing the pre-opening chart even a little closer, I zeroed in on the Energy Point at 60.50 and noticed that there were triple bottoms not too far below this Energy Point, and they came in at 60.30. Now, usually if I buy at an Energy Point and then hide my initial stop loss below a market formation, it will be a greater distance than I used here. But in this case, IF price came down and filled my order, getting me long at 60 50, and then tested the triple bottoms, price would already be right at or past the Lower Median Line Parallel, so I wasn't going to give this trade much room past the triple bottoms. In my mind, this trade would work, and work fast, or not work at all. So my initial stop is two ticks [hogs trade in 2 1/2 cent increments, so 2 ticks = .05] below the 60.30 triple bottoms, at 60.25. I did consider giving the trade more room to work on the downside, perhaps down to 60.05, which would also be below the last swing low, but that low a stop started to skew my risk reward ratio on the half of the position I'd want to exit early, if price came out of the hole at all today. So if I get filled and don't get immediately stopped out at 60.25, I want to take profits on half the position as it approaches the red down sloping Upper Median Line Parallel [which is also strung between two Energy Points, one at 61.40 and another at 61.30]. So my profit target on the first half of the position will be at 61.25. I'll be risking 0.25 handles to make 0.75 handles on the first half of the position, which is a 3:1 risk reward ratio.

Here's a quick lesson for those of you wondering how to figure out P&L or tick value on something like Lean Hogs or Cattle if you've never traded them. Even though they tell you the value of the smallest incremental value traded in these commodities, it's not always clear what that means, so here's how I learned to tell, and it's still the best way in my mind:

Each Lean Hog contract is worth 40,000 pounds of Lean Hogs, per the CME web site. To find out how much you are risking, simply take 40,000 and multiply it by your entry price, which is 60.50 in this case, and that gives you $24,200.00 for the value of your Lean Hogs at that price, per contract. Now take your stop loss order price, 60.25, and multiply it by 40,000 pounds again and you'll see that if you sell your 40,000 poounds of Lean Hogs at 60.25, you'll get back $24,100. If you subtract $24,100 from $24,200, you'll see that you'll have lost $100 a contract IF your 0.25 handle stop loss is hit. This means that each handle in Lean Hogs is worth $400 per contract. You can use this same method by finding the contract specs and doing the math--that's something you learn when you take the Series 3 CTA exam, for example...Now back to the potential trade:

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Price came down for the first two bars, testing and breaking through the Energy Point at 60.50, getting me long Lean Hogs at 60.50 in the process. Once I saw my price print, I checked for a CME server confirmation and then I placed a limit sell order to take profits on half of my position at 61.25. I also double checked that my inital stop loss was in the market and working. And now note that although price plunged through the Energy Point, it closed near the high of the twenty minute bar, well back above the Energy Point and the blue up sloping Lower Median Line Parallel. That's always a good sign when you are long...

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Price worked around without going too far for most of the day and then as the last hour or so of trading got near, short covering drove prices higher, in the process getting me out of half of my position at 61.25, for a profit of $300 per contract. When I saw my price print, I checked to be certain I had a CME server confirmation and then I reduced the size of my stop loss order and moved it up to break even. So I am now long 1/2 a unit of December Lean Hogs at 60.50 and I am working a break even order for tomorrow's opening.

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What's my upside profit target? I could easily imagine price testing the confluence formed by the 38.2 percent retracement from the Major swing high down to the recent lows and the blue up sloping Median Line, which comes in tomorrow at roughly 62 cents. IF price makes a quick climb higher, I'll exit the second half of the position there. But if it makes a slower grind higher, I'll try to keep snugging my profit stops higher, because this chimney formation could move all the way up to test the 61.8 percent retracement, which comes in at 63.40, and still not violate the recent down trend. If I get any type of price formation to hide stops behind, I'll try to work this position higher until it's run out of steam or hits my profit target. Let's see what the morning brings...

I'll be back in the office downtown tomorrow and as soon as I get in, I'll open the multimedia room. You're all free to drop by and watch me draw up pre-opening charts. I generally get there between 6:30 and 6:45 am CST. If you're interested, you can enter the private room, watch, ask questions once the markets open, and see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I may open the room once I get downtown. If you beat me there, the room may be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people. Tomorrow is a seminar day for me, so even if I do take questions, I won't be available for a very long time. But I'll give you what time I have...

I wish you all good trading!

Tim

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October 24, 2005 Morning Comments: Although I trade many commodities and currencies, I tend to show only a handful, because that's what most people that read these pages tend to focus their trading capital on. But today, I wanted to give you just a glimpse what else is out there and just how profitable other trading markets can be, relative to pounding your head against the same market, along with 90 percent of the other futures traders in the world, in the stock futures markets. The chart above is the pre-opening 60 minute Globex Canadian Dollar chart [6E Z5 or 6E #F]. I have been trading in and out of a nice long position in the Canadian Dollar, and much like I trade Copper futures when I have a directional idea, I tend to scale in and out of a position, trying to stay ahead of the rest of the market as they stop themselves into the market and then get stopped out once the move nears a "regional" end. I call this "trading a rolling chop," and what it means is that I pick a side to trade from and then carefully pick my places to enter the market, trying to buy as most other traders are getting stopped out of their long positions [if I am trading from the long side, as I am today] and then to sell my position [or at least a good portion of my position] as people are then getting stopped back into new positions as the market overextends itself.

Several weeks ago, I grew quite a sizable position beginning at 8490 [roughly 150 canada by the time I had finished adding on the way up] and then sold half my position at the Major up sloping Median Line [at 8617] and then ran a stop loss right below the Upper Median Line Parallel, which came in right at 8590, where I was eventually profit stopped out. The market has now made it all the way back to a test of 8400, and as I did my chart work over the weekend, I immediately thought that it was just about time to begin accumulating a long Canadian position. When I saw the nice confluence formed at the 8400 area, I decided I would try to buy an initial unit at or near the confluence. It's important to note that there were triple bottoms at 8423 and last week, I was long just above that level, with a stop just below the triple bottoms and a profit target at 8512, which easily got filled before this recent sell off began. So my thoughts this weekend were that when the market broke below the triple bottoms at 8423, all the stops in this market were probably run and any longs that had ben around were most likely stopped out. When I saw where the Canada futures were likely to open this morning, I knew just what I wanted to do. Let's look at my orders overlayed on a chart:

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I want to get long one unit of Canada futures IF price comes back down to test the area of confluence at 8404. My intitial stop will be twenty ticks below my entry point, at 8384 and my initial profit target, if price shoots out of the hole quickly, will be at 8498. So I am risking 20 ticks to make 94 ticks, which is a solid risk reward ratio in anyone's book.

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Price came down and tested the area of confluence, getting me long at 8404 before turning higher. Once I got CME confirmation I was filled on my limit buy order, I double checked that my initial stop loss order was in the market and then I entered my profit order at 8498. Before anyone asks, I do trade Canada using the electronic markets, though at times, I use the floor for some of my fills if I feel I need to. But generally, I trade it electronically.

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Price continued to climb higher for the rest of the day, settling the day around 8437, for a potential profit of 33 cents, at $10 a cent, which equals $330 per contract. That's a pretty nice tally for a small movement in the Canadian Dollar, and although I still have this position on and will likely add to the position if I like the way price unfolds, if I see a nice sized profit within a short period of time, I often grab it as it approaches overhead resistance [or support levels if I am short].

Don't forget that there are some very nice markets out there that most of the futures traders are neglecting. I recently closed out a short position in the Lean Hogs that took more than five cents out of the market, using this same technique. And I caught a nice short in the 30 year bonds early this morning that netted a nice 25 ticks. So once you learn to master a few of these simple entry techniques, they are easily transferable to other markets and I urge you to do a little investigating on your own. There are many nice markets to trade, where the noise is not so bad and the competition is not quite so fierce...

For those of that didn't hear, I opened the room up as soon as I walked into the Spike Trading room this morning--between 6:30 and 7am CST. And quite a few people got to watch me mark up all my charts--everything from Canada to EuroFX to the Stock Index Futures and even the Lean Hogs... I don't know if I'll be in the room tomorrow morning, but you are free to pop over and see if I am on-line. Anyone that is interested can enter the private room, watch, ask questions, see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I may open the room once I get downtown. If you beat me there, the room may be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people. If you stop by and the room is not open, you'll know I got side tracked or had a meeting and was unable to conduct a session. But I'll do my best to open the room several times a week and show how I mark up charts and answer questions when I have the time.

I wish you all good trading!

Tim

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October 21, 2005 Morning Comments: Looking at the pre-market charts I used for the morning strategy sessions, above, I was quick to point out that the green Major Median Line was still firmly in control. At least one of the traders from the seminar that has moved "off-floor" to trade at a desk at Spike now trades directly off of daily time frame Median Lines and shorted the 1200-01 area [right at the green Upper Median Line Parallel] and took his short position back yesterday at 1176 [right at the green Median Line]. I also pointed out that there had been unusually heavy options related activity and that I would be surprised if price would be able to mount a serious breach of either the Major Median Line or the Major Median Line Parallel. In pre-market trading, prices were about 5 handles higher, and I was interested in watching how the market treated this gap open higher.

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Price did indeed gap open higher and they traded higher, trying to zoom above the red Median Line, but they quickly failed and closed back where they opened during the first bar, setting up a potential failed zoom re-test sale [Note that I marked the first bar as a Zoom Bar, but it should say "Failed Zoom Bar."]. I would sell a re-test of the red Median Line at 1186 1/2, with an initial stop loss 3 ticks above the high of the day, at 11 89 3/4. My profit target would be a test of the blue lower Median Line Parallel, at 1178 1/2.

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Price climbed enough to get me short at 1186 1/2 and then headed back lower, leaving double bottoms and closing unchanged from the previous bar. Once I got confirmation I was short from the CME server, I put my profit order in the market at 1178 1/2.

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Price poked a bit higher and range traded and three bars later, made a new low for the day. And a handful of bars after that, I was filled at my profit order at 1178 1/2. Once filled and out of my short position, I wanted to see a re-test of the same blue Lower Median Line Parallel on a test and re-test entry and I If I got filled, my initial stop would be 3 ticks below the low of the day, at 1176 3/4. My profit target would be a test of the red Median Line. In essence, I wanted to take the flip side of the trade I had just taken profits on.

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You can see from the last chart that price never came back down to give me a re-test to get long at the lower Median Line Parallel. But I made a nice 8 S&P handle profit on my earlier trade, which netted $400 per contract before commissions. There's nothing better than ending a nice profitable trading week with a simple and well-executed winner. When it was clear price wasn't going to let me in on a down side re-test, I called it an "early day," and spent the rest of the trading day working on seminar materials.

For those of that didn't hear, we had a series of multi-media tests this week. People came into the private "virtual room" and got to hear my raspy voice, ask questions, watch me draw...It was a very nice time. I am going to open the room up as soon as I walk into the Spike Trading room Monday morning--between 6:30 and 7am CST. Anyone that is interested can enter the private room, watch, ask questions, see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I'll open the room once I get downtown. If you beat me there, the room may be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people.

I wish you all good a fine and wonderful weekend!

Tim

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October 19, 2005 Morning Comments: Looking at the pre-market charts I used for the morning strategy sessions, above, I didn't see any particular areas that jumped out at me--No Lines of Opposing Force, no confluence, no zoom bars that had set up late in the day yesterday. It looked like prices were going to open 4-5 S&P handles lower, and my one piece of advice was to be patient and wait for the market to show you a solid set up before even thinking of getting on board. Under no circumstances should you be chasing prices...

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Price did indeed gap open lower and trade quite a bit lower, testing the longer-term Lower Median Line Parallel and then bouncing out of the hole. At about 10am, price had peeked above the pink down sloping Median Line, filling the gap and making a new high for the day of 1183 1/2. But the next bar zoomed the same Median Line lower and so I decided to attempt to sell a re-test of the down sloping Pink Median Line at 1181 1/2, with an initial stop loss 3 ticks above the high of the day, at 1184 1/4. My profit target would be just above the re-test of the blue up sloping Major Lower median Line Parallel that price had tested right after the opening today, at 1174 1/2.

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Price climbed enough to get me short at 1181 1/2 and then headed back lower, through the green Major Median Line and eventually testing the pink down sloping Lower Median Line Parallel at 1175 1/2, before it began to consolidate a bit. At this point, I was 1 S&P handle away from my profit target at 1174 1/2, so when price left a double bottom and then started to climb out of the hole, I moved my initial stop loss order down to break even on the trade--afterall, I had six S&P handles of potential profits in the trade at one point. And there always has to be a point where you say, "You can have my brokerage, but you can't have any of my money now..."

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About the time I moved my stop to break even, I walked in to begin teaching my weekly Market Maps seminar at the CME, so I was out of touch with what price was doing [and obviously what was going on with my position]. My orders were in the market and one of my partners was watching over them and I literally didn't give them a thought...

This was one of those strange days when looking back, you feel like you missed a whole chunk of time: As I was finishing teaching my seminar, I didn't feel well, so when I got back to my trading office, my partner, the Mayor, told me I looked a little tired and suggested I go home and take a rest. That sounded like such a good idea, I simply agreed--and as I was walking out the door, I asked him if he had taken care of my orders. He replied that I had been stopped out at flat. And to be honest, that was fine with me. Sometimes you hit them straight, and sometimes you don't. And if you scratch a trade, that's generally not a bad day. I must have been tired, because I didn't even look up at one of the literally hundreds of monitors hanging everywhere at the CME to see where the markets were trading. I simply got in the elevator, went down to the parking garage and drove home and took a nice long nap. And it wasn't until I started to do my chart prep for today's posts and update my hand drawn charts that I saw just what happened while I was teaching the seminar!

At this point, the break even stop looks pretty good, especially since I don't see a low risk entry that would have gotten me long. A long time friend from the East coast once said, "Take care of the losses and the profits will take care of themselves." Amos, I'd say it's days like these that prove just how right you are, my friend.

For those of that didn't hear, we had a nice multi-media test today for several hours. People came into the private "virtual room" and got to hear my raspy voice, ask questions, watch me draw...It was a very nice time. I do not know what my schedule looks like tomorrow. Anyone that is interested can try to enter the same private room tomorrow and if I am available, the room will be there and be open with the same password. If I'm there, people can come in and watch if they're interested, ask questions, see what the software is like. I might have AutoForks up "live" drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I'll open the room unless I am swamped with morning business. If you beat me there, the room may be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. I mentioned our short S&P position several times this morning--though we are in no way giving trade signals--so some folks got to follow along if they were there for the early session. Everyone is welcome--the room holds up to 100 people.

I wish you all good trading!

Tim

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October 18, 2005 Morning Comments: Looking at the three 7:45am charts I used for the pre-opening market strategy session with the seminar traders, you can get a pretty good idea of what I was thinking once the 7:30am economic numbers knocked the futures lower: Price failed to test both the Upper Median Line Parallel AND the Median Line yesterday and if the markets gapped open lower and the gap remained unfilled, Hagopian's Rule would dictate a likely large downside directional move. And note that yesterday's highs merely made it back to a perfect test of the confluence formed by the two major down sloping Median Lines in the cash S&P market. As always, the key to making money in this type of market is to wait until price plays ITS cards and then to watch for a high probability trade set up to develop.

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Price gaps open lower and trades lower. The longer the gap remains open, the more I like the downside potential of this market. I note with interest an area of Opposing Lines of Force and I'll watch to see if price shows me a high probability set up if it indeed tests this area.

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Price climbs higher and it does test the area of Opposing Lines of Force right when Time dictates it should. And note that although it broke above the confluence and had a good amount of separation above the area of confluence, it closed below the confluence, setting up a nice failed zoom and re-test trade set up [or it could be viewed as a simple test and re-test of the area of Opposing Lines of Force]. I am looking to sell the re-test of the confluence in the E*Mini S&Ps at 1191 1/2, with an intial stop loss 3 ticks above the 1192 3/4 high of the day, at 1193 1/2. My downside target is a test of the green Major Median Line, which gave us so many gorgeous short entries over the past ten trading days, which would come at roughly 1181 1/2. To get this profit level, I am simply eyeing what appear to be average sized bars and then I overlap them by about 1/3 of their range, as I project them lower and to the right, simulating the passage of time and an average move lower-and that gives me a rough idea of where price would intersect with the green Major Median Line IF price unfolds at about an average rate.

So I am risking 2 E*Mini S&P points to make roughly 10 E*Mini S&P points, which gives me a risk reward ratio of 5:1, which is very nice. And I am hiding my initial stop loss order not only 3 ticks above the high of the day but also just above where price would fill the open gap, in case traders get a bit itchy to fill it...

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Price does re-test the area of confluence, getting me short at 1191 1/2 in the process. I check to make sure I am filled and also that my initial stop loss order is still in the market and then I enter my profit order at 1181 1/2.

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Price runs lower and then consolidates, eventually leaving a spike high at 1188 1/2 that turns into a swing high when price makes a new low for the day. As that bar closes, I move my initial stop order down to 3 ticks above this new swing high, at 1189 1/4.

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After confirming the swing high, price consolidates again, this time leaving triple tops at 1187 3/4. It's getting late in the day, so at 2pm CST, I enter a MOC [Market on Close] Stop Order, because this is a day trade, and I don't want it to turn into an overnight trade under any circunstances. And as I look at the charts, I notice that price has tested the pink down sloping Median Line twice and is now consolidating again. The day is getting late and as the third of the triple top bars close, [which is also the low bar close for the move], I move my profit stop down to 3 ticks above the triple tops, boxing in profits in case price has run out of downside directional energy--which is possible, since it has now tested the pink Median Line twice and failed to close below it. If price heads back up in a late afternoon rally out of the hole, I want to make certain I keep some of these profits...

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And finally, price heads back lower and right before 3pm CST, I cancel my limit buy order at 1181 1/2 and close out my position "at the market," which turns out to be at 1182. I then cancel all my stop orders and double check that I am working no further orders and that I sold and bought the same number of contracts. I don't want to give away any of this hard earned money! This trade netted 9 1/2 E*Mini S&P points, which is a nice $475 per contract before brokerage.

This was a nice directional trade, set up by watching the open gap and remembering the implications of Hagopian's Rule. And price seemed to gravitate right to the green Major Median Line [or should I say the "golden line," after the way it has treated me the past two weeks...]. Waiting for Price to play its hand and then looking for a high probability set up, and finally sticking with the early plan were the keys to these trades.

For those of that didn't hear, we had a nice multi-media test today for several hours. People came into the private "virtual room" and got to hear my raspy voice, ask questions, watch me draw...It was a very nice time. I'm going to do my best to have the same room up and running by 10am CST tomorrow [Wednesday] so people can come in and watch if they're interested, ask questions, see what the software is like and frankly, to get me more time practicing on this new software so we begin doing webinars on it and also mentoring and advanced seminars. I'll only be there for 30-45 minutes in the morning, because I am teaching a seminar, but if you come to the room [even earlier than 10 am], I'll have AutoForks up "live" drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I'll try to be there around 10am CST and stay for as long as I can before the seminar I am teaching begins. If you beat me there, the room will be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. I mentioned our short S&P position several times this morning--though we are in no way giving trade signals--so some folks got to follow along if they were there for the early session. Everyone is welcome--the room holds up to 100 people.

I wish you all good trading!

Tim

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October 17, 2005 Morning Comments: First, I owe the green Major Median Line a "thank you," for 11 straight wonderful winning trades. I did indeed sell against it Friday, taking a small profit out on half of the position but getting stopped out for a loss on the second half of the position. Lines that are tested that many times and keep producing deserve to be tested until they are bested...

On to today's trading: You can see the pre-market charts I used for the strategy sessions with the prop traders before the markets opened. I felt today was likely to be a two-way market, because price was running into overhead resistance early, but the strength of this move out of the hole was also unlikely to go quietly--So I marked both the early session confluence above the market at 1193-1194 and the confluence formed at the up sloping blue Median Line near the 1186-1187 area, which would likely act as support. I thought we might see something akin to "pinball" between these levels. As I said in the strategy sessions, the key is to wait for a clear set up, with good measured stops and solid risk reward ratios--and don't initiate a trade on either side until yoiu find one.

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Now note the very nice zoom bar lower, through both the blue Upper MLH and the red Median Line at the 1193 area. Once this bar closed, I was willing to be a seller, because there was a suitable measured stop area, with an acceptable risk reward ratio.

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As the bar closed, I checked where price would intersect with the blue Upper MLH during the next bar. Then I put in an order to get short at that level, with an initial stop loss order 3 ticks above the spike high of the day. So I was selling at 1193 1/2, with an initial stop order at 1196 1/2. My profit target would be a test of the blue up sloping Median Line--but note that it is an up sloping Median Line, so my potential profits will decrease as time goes on, due to the upward slope of the Median Line. If I get short, I'll have to carefully adjust my profit target as time goes on to match the intersection price.

Price came back up and tested the blue Upper MLH, getting me short at 1193 1/2. I checked that my stop loss order was in the market and then placed my profit order at 1187 1/2. I came to this price by looking at the average size bars over the past 20 periods and then I overlap them about 1/3 of their range and measure where price will likely hit the target, IF the average bars give a true projection--I can always adjust my profit order as price nears the Median Line.

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Price formed an Energy Coil with double tops at 1194 and four bottoms at 1191 3/4. When price finally broke to the downside, the length of time spent in the Energy Coil dragged up the profit target because of the upward slope of the blue Median Line. As price approached the Median Line, I carefully measured the intersection level and finally adjusted my orders to 1188, where I was filled on my profit order.

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Once price left double bottoms at the lows of the day and also began to creep higher along the up sloping blue Median Line, I wanted to try a long position. I monitored the intersection value of price with the blue Median Line as each bar closed, looking for a re-test to buy that was close enough to the swing lows formed by the low of the day at 1187 3/4. And five bars after the double bottoms were formed, price re-tested the blue Median Line at 1189 1/4, getting me long at the projected intersection. My initial stop on this long position is 3 ticks below the low of the day, at the 1187 3/4 double bottoms: 1187. And my profit target would be a re-test of the red Median Line, which measured to 1193 1/2.

In all honesty, the risk reward ratio was on the skinny side for my normal trading, but I liked the size of the stop and I had a nice buffer from the profitable morning trade to work with, so I was willing to take this second trade because it also fit with my pre-market view that this would turn into a "two way" type of day.

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It didn't take long for price to climb out of the hole, filling my profit order at 1193 1/2. I checked my audit trail to make certain that I had sold and bought an equal number of contracts and also that I was no longer working any further orders.

This was a nice "two way" day that netted 5 1/2 S&P points on the down side and 4 1/4 S&P points on the upside, for a total of nearly 10 S&P points, which was $487.50 before commissions per contract. Looking for repeatable set ups and sticking with the early plan were the keys to these trades.

For those of that didn't hear, we had a nice multi-media test today for several hours. People came into the private "virtual room" and got to hear my raspy voice, ask questions, watch me draw...It was a very nice time. I'm going to do my best to have the same room up and running by 9am CST tomorrow [Tuesday] so people can come in and watch if they're interested, ask questions, see what the software is like and frankly, to get me more time practicing on this new software so we begin doing webinars on it and also mentoring and advanced seminars. If you'd like to drop by, follow these instructions:

Go to: www.omNovia.com/sc/spiketrading/demo  and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.

As I said above, I'll try to be there before 9am CST, which means as soon as I finish the pre-market strategy session with the prop traders, I'll pop into the room. If you beat me there, the room will be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people.

I wish you all good trading!

Tim

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October 13, 2005 Morning Comments: I'm proud to say I leaned on the same green line [with a slightly new twist] and made the tenth nice profitable trade off the "golden line." As I've been telling the seminar traders all week, don't expect to find a line this reliable, with this long a life, very often...But keep going to the well until the well dries up [or the until you run out of metaphors].

As I have been saying all week, the green down sloping Major Median Line has been "calling the tune" and again, nothing was different today. As you'll see on the next chart, a variant of this Major Line again was the key to the day's high probability entry. Although a little thought and a little magic were involved, this remains a truly golden line...

The first chart above chronicles the first nine times price tried to make it back above the down sloping green Major Median Line, once price had zoomed below it. And you can see that every time price tested the Major Median Line, you could have sold the re-test and put your stop three ticks above the prior swing high, which came at the prior test of the same Major Median Line, and never gotten stopped out--and if you were day trading and using anything that remotely looked like intelligent profit targets, you'd have been hard pressed to take out LESS than five S&P handles on the worst day of this run, and it was pretty easy to take more than fifteen handles yesterday. There wasn't any creativity involved [until today's trading]: It's been a nice run of simply selling the re-tests of the same line, day after day, and then booking your profits. As I said yesterday, I know these sound like simple things, but they can be hard to keep in the front of your mind. How many traders are actually willing to sell against the same line the ninth time price tests it, even if they made money the last eight times? Human nature tells us all it cannot last, and so too often, traders try to be the one that "knows" this will be the time price breaks through that golden line--nothing lasts forever, right?

The second chart, above, is the pre-market zoomed-in look, giving you some perspective of where we were yesterday and where we are likely to find overhead resistance and some support below the market. Note that yesterday, we broke below a sliding parallel drawn off of multiple bottoms below the green Major Median Line and actually tested the second sliding parallel, drawn at the same width as the first sliding parallel. These sliding parallels act just like Warning Lines stacked below a Lower Median Line Parallel and they were "tested" when they were drawn, since they were drawn from prior lows from multiple days that were of an equal distance from the Major Median Line. I used these lines yesterday as profit targets, as price sprinted lower, to give me a 16+ S&P handle profit day. Now that you've seen what I showed all the seminar traders before the markets opened, let's see what I can find in the market today!

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Because price opened well below the Major Median Line--and opened well below the first sliding parallel--I needed to find a new place that carried that same frequency IF I wantet to look for a highh probability trade set up, because nothing I had seen so far has shown me anything that looks or smells like a change from a down trend to an up trend. But as I looked at prices during our pre-market trading meeting, it was clear that price was going to open quite some distance away from the "golden line," so I'd have to be creative.

Just by looking at the charts from yesterday, you can see that the sliding parallels are carrying the same frequency as the original Major Median Line--They have the same slope and price has tested them many times and price turned at these tests, both from above and below. So if price wasn't going to give me the original Major Median Line to sell against, I was more than willing to attempt a short entry against the sliding parallel, if I could find a trade entry set up that offered solid risk reward ratios and had acceptable money management stops. Looking at the chart above, you can see I waited for price to approach the first sliding parallel and then once it had tested it, I put orders in to get short at the re-test. This means I was selling E*Mini S&Ps at 1183 1/4. And my stop was simply three ticks above the 1184 1/2 prior swing high, from yesterday, at 1185 1/4. So I my initial stop was two E*Mini S&P handles.

My profit target? Well, my initial thought was that if price got moving, I might see a test of the Major Lower Median Line Parallel, all the way down at 1165 and change...but I decided that because of the holiday, I'd be best served to split my position into two parts and try to take some nice money out of the first portion and then see how the market unfolded before finalizing the profit target on the second half of the position. The profit target on the first half of the position was at 1175 1/2, which would be a test of the 2nd sliding parallel, which had already been tested yesterday. That would give me a nice profit of 7 3/4 handles on the first half of the position. That gave me a risk reward ratio of nearly 3.9, which is very good, so I entered the limit sell order at 1183 1/4 and initial stop loss order at 1185 1/4. And then once I was filled, I put a limit buy order in for half my position at 1175 1/2, and made it "OCO" with my stop loss order at 1185 1/4.

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You can see that price climbed quickly and after testing the sliding parallel, I was filled two bars later at my limit order, leaving me short S&Ps at 1183 1/4. And three bars later price plunged through the profit order on the first half of my position at 1175 1/2. Once I double checked my audit trail, I reduced the size of my stop loss order and watched for further clues about the directional energy left in the market. Note that on the bar that broke through the 2nd sliding parallel and filled my first profit order, price was right at an area of confluence, an Energy Point, and IF price was going to continue lower, it would need to perform now, with further extension to the downside.

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But instead of showing further downside directional tendencies, price congested and then began to head higher. And because this was a holiday and because price had now moved so far past the Major Median Line [and because I had more than ten S&P handles in potential profits on the table at one point], it was time to look at this chart with a more creative "tactical" eye. Starting with the premise that the area of confluence was acting as a magnet, or to be more descriptive, the place where a stretchy cord was tied to the ground, I measured how far price had come from the high of this move [which is the high of today] down to the Energy Point. And then I simply transferred that same distance below the Energy Point, giving me the length of the stretchy cord on both sides of the Energy Coil. As price tried to pull too far away from the area of confluence in either direction, the Energy Coil would act on price, causing the stretchy cord to snap price back towards the Energy Point. And to make the stretchy cord more useful, I simply transferred the slope of the blue Lower Median Line forming a portion of the confluence to a line that ran through both extremes of the stretchy cord, in effect giving me a new set of sliding parallels to work with. And these new sliding parallels should tell me where price should run out of downside and upside directional energy.

Now note that price had come down about the same amount below the Energy Point as it had gone above it when it made the morning's high. Once I saw that, I entered an order to take profits on the second half of the position at the re-test of the lower pink sliding parallel, where the stretchy cord should stop price from moving lower [because it would be out of directional energy]. This meant I was now working a limit order to buy S&Ps at 1172 1/2 and I saw no need to change my stop loss at this point.

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Price was unable to hold above the blue Lower Median Line Parallel and turned back lower. Four bars later, it filled my limit order at 1172 1/2, for a nice 11 3/4 point S&P profit, which translates into $587.50 per contract before commissions. Now that my positions were closed, I was curious: 1) Would price now work its way lower in a thin market, finally testing the Major Lower Median Line Parallel; or 2) Would price turn back higher, stretching and breaking the cord from the Energy Point and making new highs for the day?

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Looking at the final chart, you can see that the stretchy cord held price firmly to the Energy Point and price closed right on the blue Lower Median Line Parallel--directly off the Energy Point. My profit targets may not have been the most conventional today, but then, my entry set up had a little twist to it, so perhaps that set the tone for the day. In any event, it's always good to be a close observer of the market as it unfolds before you. And if you are capable of playing, "What if...?" you often get some very nice results, even if the desciptions of what you were picturing sound a little goofy...

Creativity can be a good thing, as long as you maintain your money management and risk reward ratios. I hope you found this example interesting. And as always, I wish you all good trading!

Tim Morge

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October 12, 2005 Morning Comments: As I said yesterday, the green down sloping Major Median Line has been "calling the tune" all of last week and so far this week, nothing is different. As you'll see on the next chart, this Major Line again was the key to the entire day--if you had this line marked on your charts and sold against it, using 3/4's of a S&P handle above the prior swing high as your initial stop loss , this would be the ninth straight trade in a row, ranging with profits from a bit more than five S&P handles to more than 16 handles, all intraday! This has truly been a golden line...

Once again, the first chart above shows the zoomed in pre-market view that's posted pre-opening on the seminar forum, right before I give 15-20 minutes of live commentary to the traders that normally trade the index futures. My message today: Don't try to make trading more difficult than it is: There's a high probability line staring you in the face. Beat it and beat it until it beats you. IF price makes it back to test the green down sloping Major Median Line, let it test it and then unless it accelerates to the upside THROUGH this line and closes above it, sell the re-test and hang on for the ride. Your stop would then be just above the prior swing high OR just above the high of the just made test bar--and if you can afford to use both as stops, use the higher of the two stop prices as your intital stop. My bit of caution was that it would be very dangerous to anticipate any change in trend UNTIL price has clearly shown us it HAS turned. There will be plenty of opportunity to buy against formations, using high probability trade set ups once price has shown it has changed direction...but it's a down trend until it is no longer a down trend.

I know these sound like simple things, but they can be hard to keep in the front of your mind. How many traders are actually willing to sell against the same line the ninth time price tests it, even if they made money the last eight times? Human nature tells us all it cannot last, and so too often, traders try to be the one that "knows" this will be the time price breaks through that golden line--nothing lasts forever, right?

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Today's trade was extremely profitable and as I said, it was based on the same green down sloping Major Median Line that I have been selling over and over again. Every once in a great while, there is a Median Line that acts like a price magnet, pulling price back to it, but yet, each time price approaches it, it turns on a dime. And when you find those Median Lines, just work them over with no mercy!

Note that I added an inside sliding parallel to the pre-opening chart today--in fact, I added one and then added another an equal distance below it. Price has been well contained by the first sliding parallel, but IF price breaks below the initial sliding parallel, think of the second sliding parallel as one of the outside parallels of a Median Line--and I'd expect price would run out of downside directional energy at or near the second sliding parallel.

Here's the trade in its simplest form: I waited for price to test the same green down sloping Major Median Line. Then once that fifteen minute bar closed, I measured where price would intersect with the Median Line and put in a limit order to sell E*Mini S&P futures, which in this case came in at 1194 1/2. The initial stop on the trade was three ticks above the 1196 1/2 prior swing high, made yesterday afternoon, at 1197 1/4. And if you think of price being contained in a relatively narrow down sloping Energy Coil bounded by the green down sloping Median Line and the first green sliding parallel below it for the past three days, I'd expect price to run to test the second sliding parallel IF it broke through the downside of this down sloping Energy Coil.

And looking at the charts, you can see that I had a confluence formed by the second green sliding parallel and the blue down sloping Median Line that came in right at 1178. This seemed like a very logical profit target to me, although at one point I contemplated simply letting price run and closing the trade MOC [Market On Close], in case the price fall accelerated as the afternoon progressed. But using price targets are much more to my liking, so I used the 1178 area as my profit target. I also have a prior gap at the 1178-1179 area, along with a Major Median Line on the daily charts that gives some support around the 1175 area, so all of this fit with taking profits at 1178.

The key to this trade? Sometimes the obvious and the simple is the best. Why make it more complicated? This trade netted a hefty 16 1/2 S&P points, which is $825 a contract before commissions. Simple can be a very good thing.

I have said here on this page too many times to count: When you find a line that works, beat on it until it beats you. So far, this green Median Line has been golden! I wish you all good trading!

Tim Morge