Trendlines Rule
Today was contract rollover for the futures markets, and prices started off with a gap lower. Without a pullback, I just watched. At about 7:15 (Pacific) the market started a bounce, and I played this unsuccessfully as a pullback. As you can see it didn’t work.
Then the market started a series of higher highs and higher lows. Here’s where trendlines become valuable. The first trendline (yellow) was drawn from the blue #1 to blue #2. Then a parallel line (blue) was created starting at blue #3. When price touches this blue line there is a potential trade, which continued higher until the morning gap was filled.
Too many traders expect reversals when gaps are filled, so red #3 was a perfect exit point. Did I mention that price hit the yellow trendline then. I love confirmation of signals. We were in an uptrend there, so I wasn’t interested in a short sale, and price just drifted lower throughout lunch time.
At red #2 we have an oversold Stochastic signal, with a trigger as the moving averages are broken. This is probably the clearest trade of the day. The pullback was just over 50% (not shown). After price moved away from this bottom it was possible to draw the yellow trendline from red #1 to red #2. Then the blue parallel was drawn starting from red #3. And that’s where price reversed - not only at the trendline, but also inside the 127% - 161.8% retracement of the measurement from red #3 to red #2.
The Fibonacci measurements are not quite as precise as earlier in the week, but that danger zone is important to watch. And when price hits a correctly drawn parallel trendline, it’s time to take at least partial profits.
The rest of the day? It’s hard to find any clear Fibonacci or trendline setups. But that’s why we need multiple entry and exit techniques. In the market, nothing works all the time.
