Order out of Chaos
Once in a while I can find a trade I like on Fed days, but this was not one of them. There seems to be so much random activity by traders trying to anticipate other traders just before and after the Fed announcements. But just how random is it?
Yesterday’s post showed how the market can sometimes turn exactly at parallel lines, giving either entry zones or potential exits. However we all know that the fluctuations that accompany Fed announcements change things. Maybe we shouldn’t expect the market to act the same under these conditions.
But what if we follow the same rules — in fact let me repeat them from Tuesday’s post.
Find two pivots that seem important to you and draw your first line (points 1 to 2.) Copy that line to the pivot between those two points that is the farthest away (3) and extend it into the future. Pay careful attention if price approaches that line.
I moved out to a 30 minute timeframe to include the high point of the rally that started in August. (No, that is not a prediction that we won’t go higher — I try to avoid guessing as much as possible.) Green points 1 and 2 look important to me, and point 3 is the most distant pivot between them. When the market had a rally this morning it reversed just as it reached the green parallel line drawn from point 3.
That big solid blue bar is what happened during the 15 minutes before and after the Fed made its announcement. The overanxious traders tried to anticipate by pushing the market up. Then by 11:15 (Pacific) we were moving in the opposite direction. And where did we stop? At the parallel to the magenta line drawn between 1 and 2.
Predictable? No. Tradable? It depends on your style. But drawing trendlines and their parallels certainly ranks high on my list of trading tools.
