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Research: trading pullbacks in CL

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Research: trading pullbacks in CL

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  #21 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/14/14, Tuesday

Trivia bit: The 14th of January is called 'old new years' in Serbia and Russia, as it was the date used by the old Julian calendar which is 13 days behind the one currently in use. Now back to trading

1. We are above the moving averages, but the long term picture still says we're in a down trend.
2. Gap up, followed by a quick bearish pullback and very strong bull follow through. The trend stops at prior resistance.
3. Pullback bar is respectably strong but not to an extreme.
4. Here we have two choices for entry bars. The first is an inside bar, which is fairly neutral to bullish, and a bit on the thick side, which would have ultimately failed. The second is a doji which makes this a complex pullback, as we broke to a new low. This alas also had failed.

If we look by A, we see that there's no real valid entry here for a 5 minute chart.

Looking at the 512 tk on the right, we see some interesting things.

i. The trend as we can see is pretty strong.
ii. This is a spring that could have triggered us long much better than the 5 minute entry bar. It also stops by an area of congestion (by the i label on the left).
iii. This is a complex pullback that would have ultimately failed and left us with a scratch or small loss, depending on how we trailed our stop.
iv. A tease for a three wave pullback, got smacked here.
v. More tricky entries for those who want to try for a complex, complex pullback.
vi. For the extremely desperate only. But on the other hand, with a very tight stop, the potential upside here is amazing.

One of the points of looking at the 512 tk entries here is to show how this chart can trick you into being overly active, thus bleeding you slowly to death.

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  #22 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/15/14, Wednesday: INVENTORIES DAY

As we can see here, there's no valid setup. However, I want to point our attention to A on both the 5 minute and 512 tk charts. On the 5 minute we see the market gapped up and then tested the highs of yesterday's pit session, and approached its close before it jumped up. This is actually a solid complex pullback on the 512 tk chart and the entry could have been valid on the 5 minute as well as a simple pullback if we had the Globex chart in front of us. We would be a bit more averse about buying here if there was serious selling pressure during Globex.

There is a super shallow pullback at B, but this was just prior to inventories and it was not something we would get involved in. As you can see the inventories propelled the bulls to new highs here. As the noon session began, we saw a pullback develop, but our rules are to not initiate new trades after 11:30 and as we all know, there's nothing more important than following the rules.

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  #23 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/16/14, Thursday

This is a pretty tricky call to make...

1. We have a temporary respite for the bearishness and we have been bullish over the past two days, especially yesterday. We are above both moving averages on the 5 minute.
2. Here we have that same tricky situation where the market appears to be continuing a prior day's trend without a gap, but the Globex session on the 512 tk chart on the right will reveal a slightly different picture. If we study i, we see that the market did what I call a double blade, it punched to the upside strongly and then back to the downside. This to me signals neutrality, and makes it truly hard to quantify this as a clean bearish trend esp. given the recent bullish context.
3. We see a pretty tight pullback.
4. Two choices here, both are too thick for a 1:1 risk reward entry. Our 512 tk chart offers us slightly better entry propositions at ii and especially iii.

What happens next by A is a complex resumption of the bullish trend, a larger time frame complex bullish pullback.

2a. This is a form of possible breakout, and it's aligned with yesterday's trend, but it doesn't cover awful much ground, it is technically an inside bar relative to today's range so I would not call this a valid setup.
3a. There is a slight pullback.
4a. A very small entry bar, with excellent shape. That makes this more tempting but we would have gotten flushed out here.
4b. This ends up being a successful complex trigger, which does offer some follow through. But it is hardly inspiring. We see the same signals as iv (a good reversal bar) and v (a solid double bottom) on the 512 tk.

Again, this is more of an inner range trade, even though it aligns with the intermediate term trend.

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  #24 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/20/14 Monday (my provider is not showing data for 1/17/14 for some reason)
The US stock market is closed on this day as it observes MLK day.

1. We are technically in a neutral stance if we look at our EMAs. Again, missing data from Friday is not helping matters but we can at least try to infer things. In the grand scheme of things the market can still be thought to have a bearish bias, though the strong rally on the 15th introduces the possibility of a reversal.
2. A pretty quiet opening at the top of the range and then a burst down.
3. A gradual pullback that turns fairly sharp
4. A small entry bar, which looks virtually the same on the 512 tk (not shown) and aligns with prior range lows, support turned resistance.

This would have failed, but could have been a scratch if it were managed aggressively. Probably a good lesson not to trade when the stock market is closed. This really is more of a ranging environment than a trending environment, and as such I would be loathe to consider this setup truly valid. Range bound markets are all about faking breakouts and trapping trend followers, and on market holidays it's not unusual to see bursts of volatility followed by dead quiet.

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  #25 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/21/14, Tuesday

1. We seem to be continuing in the bullish direction right now which is forcing the longer term bears to reassess.
2. A strong gap up and immediate follow through = strength.
3. A respectable pullback.
4. A pretty good entry bar which is thin enough to offer a good profit. But a tight stop would have knocked us out.
4a. A complex pullback entry bar which is an inside bar. The stop has to go below the last swing low, but it is not too thick.

After a complex entry it gives us some gas, then peters out right by 10:00.

Things get more interesting on the 512 tk chart on the right...

i. We have a pretty aggressive trend working its way up all night.
ii. Following we get a pullback that resumes rather aggressively.
iia. We see that the continuation is getting slightly weaker, bars are overlapping.
iii. Our first 512 tk entry, which results in an immediate stop out.
iv. A possible complex entry, which also results in a knock out.
v. A reversal right by a prior support area (as per drawn line) which follows a sell off. This one actually worked, though it would not have completed our profit target.

Yes, we did get two bad triggers and one mediocre one, but with a tight stop in each case (just below the bar) we would have suffered less pain than on the 5 minute chart, and in each case there would be a good risk reward ratio. If we managed our trade on the aggressive side we may have ended up with a breakeven or even a slight plus after v.

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  #26 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/22/14, Wednesday: INVENTORIES DAY

1. The market gapped up, as it had yesterday. Clearly the bulls are holding the line pretty aggressively as of late. Just look at those EMAs...
2. There is hardly any action in the first hour, not surprising on inventory day when people are more in anticipation mode, but a trend does emerge. The important thing is that we get a solid push up during inventories (ii on the 512 tk on the right, yellowed section), and the bulls keep marching [Btw, I am not sure that we necessarily had inventories on this day, since I'm used to seeing more candles on the 512 tk during that time, but we'll assume].
3. The market rolls over and provides just one fairly tight red pullback bar.
4. I hate entry bars like this, with the tail pointed in the direction of the trend as opposed to away from the trend. But this is what the market provided, and technically it's not a thick entry. When the trend is strong, this may be the best we'll get.

On the 512 tk, a few more notes.

i. A possible complex pullback for 512 tk scalpers.
iii. A slightly better entry bar if we took the second one with the tail on the bottom.

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  #27 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/23/14, Thursday

1. We are still trending up overall without question.
2. A decent bullish breakout from yesterday's high, but strength isn't ideal.
3. A rather weak pullback, which is good.
4. No trigger for a while, so we get a fairly deep pullback here which is more like a breakout pullback. An almost ideal candle for entry. It is technically a complex pullback even though there is no simple pullback trigger based on our rule set for the 5 minute chart.

The 512 tk chart shows us more...

i. The bullish pressure is there, but it is weaker than we would like.
ii. A nice fakeout for aggressive bears.
iii. A tempting aggressive simple pullback entry, but the sharp retracement candle should force patience.
iv. This appears to be a solid entry for a pullback, esp. if taken after the strong bull bar, the bottom of which coincides with Globex support, but we would have gotten hit here with a stop just beyond the extreme.
v. Finally an entry that works, with a good risk reward. But note this is a three swing complex pullback.

Another example of the 512 tk chart encouraging early entries, though I think that entry iii is clearly too aggressive.

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  #28 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/24/14, Friday

This is a particularly interesting example because it shows how significantly different things might look when we compare Globex to the pit session only chart.

1. We have been trending pretty high lately, but yesterday's pit session saw a bit of a sell off from a triple top (not shown). That is the last big bear bar we're seeing if we focus only on the 5 minute chart, and what follows appears to be a pullback from this movement since we begin the pit session almost exactly where we left off yesterday (no gap). We appear to be playing a continuation of the trend during yesterday's pit session close. However, if we focus on the 512 tick chart with the Globex action (purple), we see that a lot of interesting things happened that we weren't privy to with our 5 minute chart. A violent sell off (i) occurred close to yesterday's highs, then the market tried resuming the bullish trend.
2. If we just look at yesterday's closing session (pink area) we see a solid bearish trend. Looking at the Globex we see a different picture, a bullish channel after a strong sell off.
3. Our pullback on the 5 minute chart is weak, which is good. If we look at the 512 tk chart in the green area (the pit session open) we see that the bulls are screeching up, then suddenly at ii we see a strong bear bar come in. This is in essence the failure of the breakout of the previous channel high (illustrated by the resistance line on the 512 tk chart).
4. Either way we get a solid bear bar, whether you view this as an entry of a bearish pullback, or the failure of the bullish breakout from the Globex chart. That is what makes this play work, it is two different signals coinciding, essentially.

Our first setup completes pretty well.

4a. Now we have a second opportunity. We have strong bearishness here. The pullback accelerates to 'sharp' but it stops right by the resistance now turned support of the session. You can see this through the Globex session even better, there is an extra touch that confirms this level. We get a nice small entry bar, just the kind we like to see. It works pretty decently on the 512 tk chart too, at iv. It completes beautifully in both cases.
4b. We get yet another chance again. Strong bearishness continues, deep pullback ends right by support turned resistance from the last one, followed by a delicious A+ grade reversal bar, with a nice long tail and low close. Takes a longer to complete, but it ultimately does.

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  #29 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/27/14, Monday

1. We have been seeing some bearish action lately from Wednesday's highs, last Friday closed lower and it seems the bears are regaining some momentum for the time being.
2. This is definitely a down trend, no doubts about who's in charge here.
3. This all depends on what you classify as the real pullback, because this is technically a complex pullback. Either way, the bulls are not firmly in control anywhere here.
4. Here we have two choices. An aggressive entry could have been taken right after the first pullback bar, but that would have gotten us stopped out rather quick (see also i on the 512 tk chart on the right). With the Globex chart we could have attempted a reentry at ii, but it would have had the same sorrowful result. The next 5 minute trigger was better, and it wasn't thick, it was about just right. On the 512 tk chart this would have been a challenge (iii), no easy way in here.

The trade completed with some reluctance, a time stop may have seen an exit for a scratch, else you would have had to hold it for quite a while into the noon session (our proposed rules permit holding past 11:30, just not initiating past 11:30 am).

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  #30 (permalink)
New York, NY, USA
Posts: 105 since Jun 2013
Thanks: 2 given, 46 received

1/28/14, Tuesday

1. We have a pretty strong gap up. Yesterday was on the bearish side, but we have had a good mix of bulls and bears so we are fairly in balance.
2. This is definitely a strong trend beyond a doubt, we can also see that from i on the 512 tk on the right.
3. Our pullback here is understandably weak due to the strong bullishness.
4. We do get a valid entry bar, it is not thick (passes the test just by a tick) and is bullish in color. I just don't like the tail above. Looking at the Globex we don't get a solid entry bar here really, there is an idea at ii, but we get ticked out at iii if we trail right behind it.

Completes really fast.

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