by TdN Analysts Yahoogle and Jayp
The New Year has kept us busy here at Trading da Numbas, with a sharp market downturn thrown in for good measure and an expected increase in volatility. As you'll see below, we were looking for a terminal pattern to complete in the market, and a steep decline generally following the red path shown in charts for our members in advance, while sidestepping a few potential traps along the way. As a bonus, we're also including one of our Trading Recap learning pieces that highlight and explain specific trades based on our TdN real-time market guidance.
Approaching the recent highs
As we came into the recent highs, we were keenly aware of the potential terminal pattern (an Ending Diagonal or ED); at the same time, we had to remain unbiased and guard against any bullish break that could trap the bears. During the market's run-up in December/ early January premature shorts who lacked our market guidance had been squeezed mercilessly.
At Trading da Numbas we drew our red line in the sand at 1151 SPX. If the market stayed below this key level that our members had access to, then the chance for a downturn remained very good. At the same time the danger of this level getting broken could not be ignored as it was ideal for the placement of stops.
After 3 different tests, the market turned lower from 1151 SPX; our members were given charts explaining the prospects of any potential downturn, or of any break above resistance. In the event of a downturn, our members were told to expect a downward move of 25 to 65 points (a conservative estimate).
The first featured chart followed the January 8th session. The second was posted one week later. Our members received multiple daily updates in between, with additional real-time market guidance in our TdN chatroom. As you can see, when the market did turn down from 1151 SPX, it reached and reacted to the levels shown on our charts.
Figure 1: Chart Presented after the January 8 Session
Figure 2: Chart Presented after the January 15 Session
Our analysis continued in finer detail in our TdN chatroom. Our members received intraday charts, showing key levels combined with developing Elliott Wave counts that pointed the way the market was heading.
Not only did the market respect out key level at 1148 es / 1151 spx, but after the downturn began, our members were given the key level, where the lower high was to occur, which was the starting point of the 3rd wave down. Then later on, we did the same with the 4th and 5th waves. This was highlighted in our Intraday Market Trend Indicator charts which are updated every 5 minutes throughout the day.
Figures 3 and 4: Intraday Market Trend Indicator Charts
Given these optimal entries, our members were able to enter highly profitable trades, with great risk/reward ratio (minimizing risk, while maximizing the reward/profit potential).
Utilizing our Market Analysis
Here we show a few recent trading ideas, in the hope of helping those who have trouble finding trades, or executing them properly; or those who fail to follow our market analysis in a practical way. We highlight a few recent trading ideas which follow the market analysis that was given to our members in our chatroom and forums.
This first chart shows the long off Monday's reversal, where 1116 and 1120 were both recovered. One may say, "I don't like chasing." We would tell anyone who said this that "a gap-and-go reversal coming off a corrective low is worth chasing". Risk was minimal in this spot, and the reward was decent.
That is a typical set-up an unbiased trader must be able to take advantage of. A biased trader, who can't help thinking the top must be in, will fail to pull the trigger.
Figure 5: Chart Showing Long Opportunity from the January 4 Reversal
Now, just to show how unbiased we are, we have not one but two examples of short trades. Even though the market did hold support, a small profit was achievable in both cases. The risk/reward was also very good, as the market had reached certain key levels, and we had valid terminal patterns.
However, one should notice the importance of taking profits on time, especially when we warned about a possible reaction off key support or resistance. Without this important ingredient, the trades would go nowhere, and the trader would watch haplessly as the market took it all back. The cardinal sin of letting a nice profit turn into a loss should always be avoided.
Figure 6: Subsequent Examples of Short Trading Setups
You too, can join us on the right side of the market, and you don't just have to take our word for it. Being a Trading da Numbas member brings you in contact with our community of traders where you can exchange stories, share ideas, and compare notes with other fellow traders, and even make new friends at the same time. Visit us at www.TradingdaNumbas.com and take advantage of our one-month trial membership.