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Trading PA Practice - trading the right edge


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Trading PA Practice - trading the right edge

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  #1 (permalink)
 benbrooke 
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hey guys

i am starting this thread for education purpose
this will help all us to understand how other traders think

when you answer explain why will you take Long / Short and where will be your stop loss and profit target


so here is the first puzzle

the chart with the trend line is the 5Min chart and the second chart is the 15Min chart

so what will happen next ????

thanks for your participation (and no cheating )

ben

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 vast 
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15min shows buyers are dwindling. Last candle a sellers wick. TL about to break on 5min. I think a short is on the cards if we get a break of the TL.
But then, what do I know. lol

 
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 thatguy 
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Ok, I will put my ego on the line...

The last two green bars (marked with the red arrows) shows rejection to me. The first one have the longish upper wick and high volume.
The second one made a half hearted attempt on low volume to rally again, but couldn't make a new high.
However, the chart shows a fairly strong rally up to that point and without being able to see if there is some kind of longer term resistance at that point to provide context, I want to see more confirmation. This came in the form of a 1-2-3 pattern that I am anticipating at the 2nd last bar on the chart, the doji before the last red bar. I would have anticipated a 1-2-3 pattern at that point and had my sell stop one tick below the doji bar.


Since what I would have done on the bar before is not in the spirit of right edge trading, what I would do now is the following:
  • Place a sell limit order one tick below the low of the doji; the blue line.
  • My stop would be three ticks above the high of the doji; the red line.
  • My target would be 2 ticks above the previous high that sticks out to me as I would expect that to act as support now; the green line.
I would enter the limit order because if I go short at the current price, I don't like my risk:reward. If it fills, great, if it doesn't, I will wait for the next opportunity.

I don't use trendlines in my trading, so I am not factoring them in at all.

That's my story and I am sticking to it. Win or lose.

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 Big Mike 
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I believe the safest course of action is to wait for one more 5m candle, to see what price did at the TL.

But I like to say "we're bullish until we're bearish", and the chart is bullish. So go long again on the TL tap. Most TL breaks fail the first time.

Stop = swing low minus a tick, target = top of TL.

Mike

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 DavidHP 
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Looks like an uptrend to me.

I would be using volume bars in addition to this to get a 'feel' for the action at this level.

But without those, I would place a buy order near the bottom of the next 5 min candle. Stop below the low of that candle or the previous candle (current red candle). Even if I am wrong, it is a low risk entry and the loss would be minimal.

Target would be the upper trendline initially.



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 benbrooke 
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guys,

first i will like to thank you for participating in this thread i think it will be very educational for all (i am playing this game almost on a daily basis )


so here is the answer traders that short 1Tick below got stop out

the market did show sign of weakness on higher time frame but if you want to short the high time frame remember that you need higher stop loss

people who join the trend made money and the risk was so small
you can put your stop loss few ticks below the trend line and never get stopped out

also if you look at the volume on the 5 min chart you will see that volume is declining

so you dont really need a volume chart for that

hope you enjoy this practice

i will post more chart on Monday


ben

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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 cory 
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its tricky, it was almost at the end of trend

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 benbrooke 
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Corry ,

Great way to look at this!!!!

Ben

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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 David_R 
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Another thing to consider is where is price in terms of some key level. Is it near a floor pivot, a prior area of resistance on a higher time frame, or in no mans land?

This is a good exercise, Ben. Thanks.

Also, if trading this type of price action one thing to look for is supply entering the market. If the uptrend is going to reverse, there needs to be supply and that will show as increased volume on a down bar. As Ben pointed out, the pullback was on declining volume.

David

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 benbrooke 
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David ,

its an option!

but the idea of this exercise is not reallying on any indicator , what will happen if pricing come after a crash and you dont have pivot there or is the market is at all time high and you dont have any resistance ?

I think that if you spot a trend join the trend! this is were the big money is !

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

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 David_R 
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Ben, I agree. My meaning about the pivot level was in context of your example, that if price is short or just under a key level there is a high probability that it will hit that level. I think. But I understand what you are saying completely.

I got you message and will call either Sunday or next week. Ok.

David

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 benbrooke 
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so here is the second puzzle

I marked trend lines on the 15Min chart (top) and 5 Min chart (bottom)

so what will happen next ????

thanks for your participation (and again no cheating )

ben

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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 David_R 
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Ben,

My opinion is that the market will break the trend line and move higher. I base that on the volume readings on the 5 minute in conjunction with what the candles sticks are doing.

How did i do?

David

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 cory 
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next direction is still down as price is still lower than prev high, there was the double bottom but price has traveled quite a distance from there.

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 Big Mike 
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Best thing to do is just like last time. Wait for the following candle for confirmation if the TL will be broken or respected. There is no need to rush into it.

Also it's hard to do with your chart because there is no time stamp, and I use time of day as part of my rules. For instance that big volume push on the last bar or two could be the open, or it could signal a change of momentum.

Mike

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 benbrooke 
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Mike

good point on the time stamp for the next puzzle i will add time of the day

BTW assume that you have to take a trade right here what will it be?



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benbrooke View Post
Mike

good point on the time stamp for the next puzzle i will add time of the day

BTW assume that you have to take a trade right here what will it be?



But I don't have to. Discretion and patience are key.

Hypothetically and pure gambling: you go short until proven otherwise (until the TL has failed with two legs).

Mike

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 benbrooke 
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Mike ,

agree 1000000% with you on patience so lets me put it in a different way

so you were short at the top of the move and now you have runner left what do you do? do you add to position or bailing out?

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Mike ,

agree 1000000% with you on patience so lets me put it in a different way

so you were short at the top of the move and now you have runner left what do you do? do you add to position or bailing out?

Neither, not until the next bar is finished, and maybe not even then. Especially since this appears to be the third tap, at least, against the TL. Each tap that goes by increases the chance of a TL break.

Mike

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 thatguy 
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If I was trading that, I would have done nothing at that point. If you were holding a gun against my head, I would go long. The red bar on high volume looks like a shake-out to me with the attempt at going lower being rejected. After the next bar that looks like indecision, the market moved higher on still very high volume. Something seemed to have happened and the high volume and wide range bar looks like demand.

Of course I am 0 for 1 here, so everyone might be better off fading me.

 
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 David_R 
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I went and looked at Ben's puzzle again and he asks what will happen next? Correct me if I'm wrong, but I didn't read it the first time as "would you go long or short?" I don't think we have enough information yet to decide what to do. Do we?

D

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 benbrooke 
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guys,

thank you for participating in this thread!

here is the results

as you can see volume has been increase and we did create a reversal candle so if you were bullish you were right

now not saying that the short was wrong you can take the short position with a tight stop
in fact i will try to short this move with very tight stop and reverse this way i will join the trend and if not i will reverse my position


ben

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 benbrooke 
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I went and looked at Ben's puzzle again and he asks what will happen next? Correct me if I'm wrong, but I didn't read it the first time as "would you go long or short?" I don't think we have enough information yet to decide what to do. Do we?

D

david
what other information do you need?
the way i trade is if i see low risk entry to trend i will take that the worst case i loose a little and then reverse.

think about this this way , if price get to the mid line (futures.io (formerly BMT) method) from the bottom you will have a minimum risk to enter short and if you get stopped out you can reverse.

for me its all about minimum risk (i am not saying this is right or wrong but this is how i look at the market)

ben

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 benbrooke 
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here is the results with the futures.io (formerly BMT) CMA now the picture look much clearer

would you wait for the next bar now?

ben

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 David_R 
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Ben,

I guess what I mean was that I would be apprehensive going short at the tend line based on the price action and the volume patterns. Because the volume was increasing on the down bar witht the bar closing well off the low it looks like "accumulation" from high volume traders. As another person suggested, the up bar that dipped down and then came all the way back up and closed on the high looks like, as they indicated, a shake out. So, based on this I would be hesitant to short. The chart you post now paints a completely different picture than the one in the puzzle. This picture gives a larger view of the market and the price action. I now see that the area in question is making a higher low. If I put these pieces together I may be thinking long before the TL break and certainly after.

Does this all make sense?

David

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 benbrooke 
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yes its makes scene

since this is only a practice can you look at CL 2/26 and send us how will you analyze and trade the day setup.

thanks david

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 Big Mike 
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Ben,

Next time I'd like to see the full page screen shot like you just showed, right up to the bar in question. My mind works better this way To prevent cheating you could always just connect to Simulated Data Feed for a few hours or something if you want to really prevent cheating

Yes, having CMA on there makes it very different, at least for me it gives it a new perspective.

Mike

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 benbrooke 
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I will mike,

and i do this practice to show all how we utilize PA and futures.io (formerly BMT) CMA which is a GREAT indicator

Ben

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 David_R 
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Ben,

I understood your request to mean analyze Fridays action and give my input for going into Sunday/Monday. I hope that is what you were asking for because that is what I did on the attached picture.

What I have done is worked up what I consider to be a possible scenario based on my bias. My bias is that CL is moving higher based on the higher developing value area and the higher time frames are in up trends. Of course anything can happen and one of the beauties about day trading is the taking advantage of intra-day trends.

It will be interesting to see what happens, but I would like to see CL move down into the balance area indicated on the chart with confluence of the 61.8 retracement. If whatever method one uses to determine if price is reversing there, a long trade with a potential initial target of the POC from friday is possible IMO. The average daily range could also be the target or the virgin POC. The problem I have with these kinds of trades is that one needs to hold through all of the oscillations of price and that can be tough to do.

FYI. I have commented on single prints on the Market Profile and corresponding low volume area that took place in the A period on Friday. The term low volume can be confusing because it shows up as low volume on the horizontal axis of the volume histogram to the right of the lettered profile. From what I have studied it takes high volume on the vertical axis to create this situation. The meaning being, it is large players entering the market pushing price higher at a rapid pace.

Ben, if you were looking for something other analysis let me know.

P.S.

I added a second pic from Friday the 26th on the ES. It is an example of what I am referring to in the CL scenario.

D

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 benbrooke 
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This is Great Analysts!!!! thanks you so much

BTW i just started to read "mind over markets" to understand market profiles

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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 David_R 
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benbrooke View Post
This is Great Analysts!!!! thanks you so much

BTW i just started to read "mind over markets" to understand market profiles


Ben,

thanks. I appreciate that. Lets see what happens with CL.

I have not read Mind over markets, but I have heard good things about it. I have read a couple of others such as Markets in Profile ( I think that is the name). I don't recommend that one. I found it confusing. I the read Stiedlmayer's new book which seemed to be a sales pitch for his software.

David

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 David_R 
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David_R View Post
Ben,

thanks. I appreciate that. Lets see what happens with CL.

I have not read Mind over markets, but I have heard good things about it. I have read a couple of others such as Markets in Profile ( I think that is the name). I don't recommend that one. I found it confusing. I the read Stiedlmayer's new book which seemed to be a sales pitch for his software.

David

Ben,

The analysis from the other day seemed to play out fairly well. Hit a low of 78.06 and almost up to 81.0

d

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 benbrooke 
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YOU ARE THE MAN !!!

i think you should start a thread on analysis for the next day this is a good home work

Ben

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-- Albert Einstein
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 David_R 
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YOU ARE THE MAN !!!

i think you should start a thread on analysis for the next day this is a good home work

Ben

Ben,

I wouldn't go as far to say I'm the man. Its nice when something plays out as analyzed. I wished I had traded it as such.

I have considered doing a thread on market profile and do analysis on CL and ES. I don't know. I'm not a financial consultant of any kind and not an expert in the field either. I'm not even a profitable trader, but the exercise may be useful. I will give is some thought.

I would still do MP analysis for you if you decide you want that. How is the book going?

D

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 benbrooke 
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David
Great to here that you will consider MP thread , reading your post was very educational

i have been studying all week long so i didnt have the time to trade.

i am still reading "mind over markets" this is a great book
i also spoke to floor trader veteran and he said that this is the "bible" of the floor traders

ben

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 benbrooke 
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so here is another puzzle

can you guess the next move?
where will you enter and why and were will be your stop loss


ben

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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 David_R 
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benbrooke View Post
so here is another puzzle

can you guess the next move?
where will you enter and why and were will be your stop loss


ben

Ben,

This is a very good puzzle because I arrive at a conclusion or opinion, which is of course what you want, but what it brings out in me is what it interesting. My plan of action would be to go long with a stop below the trend line. What I would want to do is go long as close to the trend line as possible, but what may be the correct thing to do is wait until the high of the green candle is taken out. the reason for waiting is for the market to prove it wants to go higher. The stop loss is below the trend line because it has held so far.

David

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 thatguy 
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Initially I would have gone short. The bar marked with the red arrow looks like rejection to me and the 3rd last bar that is an engulfing would be me confirmation of a rally that fell short and I would be short.

But then... The last two hammer like bars forming a tweezer bottom in the little consolidation area that formed after the WRB would lead me to believe this is another accumulation opportunity and not the start of a breakdown. So, right now, I'd do the following:
  • Long at high of last bar at blue line.
  • Stop two ticks below low of last bar at red bar.
  • Profit target two time risk for 1:2 risk:reward.

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Ben,

This is a very good puzzle because I arrive at a conclusion or opinion, which is of course what you want, but what it brings out in me is what it interesting. My plan of action would be to go long with a stop below the trend line. What I would want to do is go long as close to the trend line as possible, but what may be the correct thing to do is wait until the high of the green candle is taken out. the reason for waiting is for the market to prove it wants to go higher. The stop loss is below the trend line because it has held so far.

David

Hi David

IMHO, I don't think you can conclude that the trend line held, since the line is simply drawn through the low of the last bar. Using the low of the last bar, means by definition that the bar "held" since it's low is use to anchor the line.

I don't think a trend line can be drawn until a new high is made. If trend lines are drawn like in the picture above, then two bars ago the trend line would have looked like the purple one in the attached picture and look like it held as well, simply because at that point it was the last bar. If the next bar make a lower low, then the trend line would look like the blue one and one would conclude again that the trend line held.

I admit that I don't use trend lines, and I could be completely wrong here. I found trend lines too subjective and too easy to draw lines the way one wants to see them. I think Trader Vic has a good explanation of drawing trend lines in a consistent and mechanical way in one of his books.

I'm sorry if this is off topic for this thread and hope it is not perceived as me being arguementative. My feelings won't be hurt if the post is moved or deleted.

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benbrooke View Post
so here is another puzzle

can you guess the next move?
where will you enter and why and were will be your stop loss


ben

next move is probl up because the current bar closes above the horizontal red line.

sell stop below yellow box, target a, b
stop loss at top of yellow box.

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thatguy View Post
Hi David

IMHO, I don't think you can conclude that the trend line held, since the line is simply drawn through the low of the last bar. Using the low of the last bar, means by definition that the bar "held" since it's low is use to anchor the line.

I don't think a trend line can be drawn until a new high is made. If trend lines are drawn like in the picture above, then two bars ago the trend line would have looked like the purple one in the attached picture and look like it held as well, simply because at that point it was the last bar. If the next bar make a lower low, then the trend line would look like the blue one and one would conclude again that the trend line held.

I admit that I don't use trend lines, and I could be completely wrong here. I found trend lines too subjective and too easy to draw lines the way one wants to see them. I think Trader Vic has a good explanation of drawing trend lines in a consistent and mechanical way in one of his books.

I'm sorry if this is off topic for this thread and hope it is not perceived as me being arguementative. My feelings won't be hurt if the post is moved or deleted.

Thatguy,

No argument at all. I appreciate all other outlooks. I said below the trendline, but at the same time my meaning was below that swing low for the stop placement. I agree with you about trendline in general. I think if they contact 3 points they have more validity though.

D

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 Arno66 
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up? green candle on 5 min.

 
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hey guys ,

The right answer for this puzzle is to go long

stop should have been below the trend line
the reason i draw this line like this was in the last 2 bars the trend line "held" which mean for me that we still going higher


thanks all for participating

ben

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benbrooke View Post
hey guys ,

The right answer for this puzzle is to go long

stop should have been below the trend line
the reason i draw this line like this was in the last 2 bars the trend line "held" which mean for me that we still going higher


thanks all for participating

ben

I wanted to point one thing out that I saw on the chart and would like to know what others think about it.

Before the small green up candle there are to red bars. The volume on the second red bar is greater than the volume on the first red bar, but the range of the body of the second red bar is narrower, or not as long as the body on the first red bar. What I was taught that in VSA terms, the only way that this can happen is because there is more buying in that bar. I was taught it is a sign of accumulation. Any other opinions or thoughts?

David

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 David_R 
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Hello All,

I hope Ben does not mind me hijacking his thread with a a chart of my own. Since this is a price action thread I hope there is enough info on the chart to make a determination. Based on what is seen on the right edge, what would we anticipate happening next. Or, I guess as Ben would say, would you go long or short and why?

Added a second chart. First is the 5 minute the second is the 15 minute.

David

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 benbrooke 
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David ,

feel free to publish more puzzle i really like it and encourage every one to do it (but one puzzle at the time)

one problem when you publish a puzzle , publish also higher time frame like i do

thanks

ben

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 benbrooke 
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David ,

i will go long with a tight stop below support (see pic) if fails i will reverse
the way i see that is that the market is going side way (15Min) and this kind of market i will buy the low and sell the high with tight stops

thanks for the puzzle

Ben

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 thatguy 
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I was trading that market, I wouldn't be doing anything at this point. If I have to do something, I'd go short at low of the last bar with a stop just above the high. Profit target would be two times risk.

Failure to make a new high and then a breakdown on high volume looks to me like it is going lower. The last bar attempted to be a rally from a double bottom, but failed on high volume. I'd say it is going lower.

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 Big Mike 
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Can I play?

If so, here is my chart for today.



Do we hit 85 or 75 first from here? Simple question, what is your answer?

Closing price is 81.49 so I've even given you a skewed risk/reward, it could be skewed in your favor depending on your answer.

Mike

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Look to me like we going to see 85 first
the reason for that is i see pressure to the upside every time oil is retracing down you see buyers coming in ..

that what i think will happen

ben

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 David_R 
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Sorry for the delay in posting the update to the puzzle. I though more would participate. I've attached the chart with the results. My question, and I'm asking because I'm not sure, but is the down part with the large wick above actually a bar of strength? My theory is that it is.

David

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 David_R 
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benbrooke View Post
Look to me like we going to see 85 first
the reason for that is i see pressure to the upside every time oil is retracing down you see buyers coming in ..

that what i think will happen

ben


As much as I like to second guess myself, I'm going to have agree with Ben and say 85 first. I will say that the potential for a pullback first before 85 is there, but not as deep as 75, is my opinion.

David

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 casey44 
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"Do we hit 85 or 75 first from here? Simple question, what is your answer?
Closing price is 81.49 so I've even given you a skewed risk/reward"

Good one, tricky. Without overly studying it, my first reaction is to say 75. Why? Simply looking at the slope/momentum of the four legs you've drawn the blue lines through. Second leg up is at less momo than the first leg up. And second leg down is more acute, sharper momo down, than the first leg down. Too, this last leg up just looks more corrective to me compared to the last leg down which looks more impulsive. Am not savvy about the meaning of the ratios 1.128, .886.

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 Arno66 
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I am going with 75. There are no conviction from the buyers when you look at the candles.
Head and shoulders?

 
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Big Mike View Post
Can I play?

If so, here is my chart for today.



Do we hit 85 or 75 first from here? Simple question, what is your answer?

Closing price is 81.49 so I've even given you a skewed risk/reward, it could be skewed in your favor depending on your answer.

Mike

Looks like 85 Got hit first

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

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benbrooke View Post
Looks like 85 Got hit first

Beat me to it

But actually, day high is only 84.98 so far

edit: Oops can't see, 85.00

Mike

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Highest high since October 2008.

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