Trading the Range

The March 17^th sell-off broke the origination point of the up move and quickly reversed back to the range between the highs of the year and the double bottom. A second sell off broke the double bottom but was unable to reach the origination point. This was a strong bull signal. We are now at the double bottom point of interest and moving in a tight range. If that point doesn’t break, than we believe the break out to the upside will occur and test the highs once again. It’s very possible that we’ll see a swing up, fail at the highs, and then reverse back to the double bottom point of interest. If that point breaks it’s likely the trend will continue to test the origination point. We’ll have to see at that point the signals for the next move. The range is very large and it’s very important to maintain your points of interest as the market makes its moves.

Waiting for major zones to dictate direction

The NQ has been in a steady range for the past 4 days. We failed to break out of the range on Friday, with the 1 hour candle closing back in the range. We wait for critical points of interest to break and follow through to give us sustained moves.

- Break of previous day's low from Friday could signal profit taking and a move to the bottom of the range and possibly breaking out to the downside.

- Break of POI at top of range could signal attempt to test PDH and possible final bull trap up there.

I highlighted the zones on a 1 hour chart below. You really want to wait for sentiment to develop a move and then trade in that direction. Right now, the signals are yielding 2-5 points on average which is not enough to build a position, but it is enough to take profits repeatedly. You need to make sure that you are reasonable with your targets and wait for a significant move to develop for position building. Green zone is where we are looking for bulls to succeed and upside movement. If there is a buyer failure in that zone, we are then short the breaks of the range. The red zone signals possible shorting pressure. If we break that range to the downside, we are looking for shorts. If we have a seller failure there, we will look to buy with stop at SF.

News Announcements for Monday
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2:00am JPY   Prelim Machine Tool Orders y/y                                                               

3:00am EUR  German Trade Balance                                 

3:45am EUR  French Industrial Production m/m                                           

4:15am CHF  Retail Sales y/y                                 

7:50pm JPY     BSI Manufacturing Index                                             

             JPY     Monetary Policy Meeting Minutes                                                           

             JPY     Tertiary Industry Activity m/m                                  

             JPY     CGPI y/y                                                             

8:01pm GBP    RICS House Price Balance                                                                            

8:30pm AUD    NAB Business Confidence                                                           

12th-14th NZD REINZ HPI m/m

Trade the Trend - following major resitence levels.

The month of February ended very volatile as expected. We had lots of buying and selling opportunity and capitalized on the large trend swings. We now look forward to the month of March and it should prove to be interesting as we continue to test the new highs of the year.

The 1 hour chart shows us that we broke through the major resistance in the 2760 to 2770 range. This is what we expected going into this trade following the breakout of the previous day. One of the rules is to not pick bottoms and follow the trend until it is confirmed to have reversed.

The 5 minute chart shows how we started to build our positions last night and into the morning. The profit position is the buy at H1 after we hit the low of day (LOD). We placed our stops a tick below the LOD. The NQ since then hasn’t tested the LOD levels and looks to continue the uptrend. We will look to add to positions on the breaks of HOD and continue building the positions as the NQ rips up. The most important thing is keeping the trade risk free (RF) and keeping your stop above avg price. The next point of interest (POI) is the highs of the year. We’ll expect major resistance at these levels and see how it plays out. We do not pick tops or bottoms.