Friday, August 22, 2008

What is not happen yesterday and today's profile

We have seen yesterday's bullish profile below. I thought it would be interesting to discuss what did not happen. We opened at VAL and was immediately bought up. It was very interesting to me that we did not probe below any recent lows (on pretty negative start and news). The 64-67 area was of interest to a lot of buyers and the commercial buying as shown in my filtered chart yesterday continued throught the day. In fact right after my post it went to make higher highs. From a trade perspective I had a long in the C period which I exited all out too early. And two shorts that took back a large portion of my profit.

Yesterdays dominant flow was indeed too dominant as was already evident in my post. I have noticed this time and again(but I am always surpised by it ;-))that when the other timeframe grabs clear control of the market, they are generally not deterred by short term news. My sense that the market might come to its senses and the weak longs bail (which is the reason why I exited early), did come true. But the weak longs simply sold into resting bids who were buying for a different time frame. The buying in the futures markets managed to pull the equities markets up.

In retrospect, here's the lesson I learned from yesterday. When you exit a trade too early. It causes you to enter into semi-revenge trades. Although I had thought I dont take revenge anymore ;-) the mind finds a way rationalize it (especially if price lingers at a level too long). You start getting visions of the future.

So here is today's profile so far. We gapped open higher well above value.

There was a a nice trade entry in the F period low and with oppurtunity to scale out as we semi-stalled in the I. I have a little runner to manage the rest of the session.

Todays dominant flow in the IB came in on the buy side. In the bid ask analysis below, the 6:50 bar got the first wave of paper in. And the 6:59 bar sell off was absorbed into the resting bids.

The PNF chart below shows where we have been flat lining. The PNF or point and figure chart is a great tool to understand what the price is trying to do. In fact it is the genesis of the Market Profile charting. It takes out a lot of noise in the traditional charting systems.

No comments: