Thursday, August 4, 2011

Shooting fish in a barrel

With the markets down big today (8/4), it moved in such a way that created many setups left and right.  So yes, it was like shooting fish in a barrel, but unfortunately, I was busy doing research and wasn't trading.  Although I admit, with this slow and steady train wreck taking place, I couldn't help but glance at the markets often.

There were many trades mentioned by Trader-X on his blog as well as in the comments, and most were the usual "Pullback to the Retracement Zone" type setups.

However, here are a few setups inspired by Trader X's "push through" type setups that he discussed on his blog several years ago.  They are essentially 3 bar setups where they run up against some sort of held bid or offer -- another way of saying a big buyer or seller is defending a price level, and you enter once the level is broken.

Each succeeding bar generally compresses and starts to narrow in range, thereby usually creating an ascending or descending triangle type pattern.  And once the big buyer/seller runs out of ammunition, the price breaks sharply.  The only concern is a potential fake out breakout -- so you just need to watch the price action closely and be ready to exit quickly if the volume and follow through is not there.

BZ had a couple interesting setups, the first was pretty close to a "push through" setup, although the lows were not aligned at the same level.  A break below the 3rd bar was the trigger.  And the 2nd trade was more of a consolidation caused by a held bid.  The break below the 7th bar was the trigger.  Both resulted in a sharp break, helped in part by the overall bearish nature of the markets.
BZ - 5min

CTB also had a buyer supporting the $12.50 level who ran out of ammunition after the 6th 5min bar.  The break was sharp and the FE was reached in 15 minutes.
CTB - 5min

WNR was also yet another similar setup to those above, and once again, when it broke down after the 6th 5 min bar, the FE was not far.
WNR - 5min


timo4sho said...

Hi Grove,

first off ... great blog!!! Really liking your content ... keep it up ;-)

I'm quite interested in how you find those candidates at the time of the setup .. as I am having difficulties finding them at the time. Hindsight is nice, but doesnt make you money ;-)

Thanks for your time

timo4sho said...

BTW ... I think you are on a great way to becoming a successful trader ... very good work ethic ;-)

Grove Under said...

Thanks much for the feedback!

I started to write a response to your question, and realized it was getting too long for this comments (as is usually the case, ha!).

So I've posted a new blog entry.