FAILING OR BREAKING: BOT'S TELL A STORY

Whether the BOT's are failing or breaking, they will tell a story about the market.  If price breaks the BOT (break out target)  the play is to use a long/short and expect a trend to develop.  Stops (according to your risk plan) are used to prevent extended losses from a failed break out (FBO).  Once in profit, and according to your target, profit is taken and a runner order is allowed to follow the trend to maximize profit.  Whether you only use one contract (C), or multiple C's, the stop will follow to capture the TL profit.  No one can pick tops nor bottoms in a trend.  Maybe you get 2-3 points one trade, 6-8+ in another.   Take what you get.  There will always be another trade.

BOTS:

Break out targets for the long and short are developed prior to the market open.  In our blog, those have been for the US open for both the ES (S&P500 futures) and the 6E (Euro-dollar futures), however we are experimenting with other indices and market opens.

A breaking BOT trade is explained above.  But the bot can fail, or we can have a FBO.  A failed BOT is where price can consolidated just below.  It will eventually break or it will reverse.  Look for both trades when the BOT fails.  With a FBO, it is reasonable  that a trade hits, although there are reasons not to take the break and we will discuss those in a later blog.  On a FBO aggressive traders place contra trades expecting a market reversal.


DISCLAIMER:  This was another short trade day.  Three students took first place in a stock contest sponsored by the Economic Council, and their award luncheon was today.  Any trade or potential trade discussion after 9:30 AM EST are hypothetical, however they are believed to be representative of potential trades based upon our settings, criteria, and trade discussions presented in prior blogs.


TODAY:  6E

The Euro 6E was selling about an hour after the Euro Zone market opened.  Knowing it was a short trading day, we opened chat rooms early and provided the BOT's for the 6E and the ES.  The 6E short BOT provided the first trade, with a +10 and the runner being stopped at +10 as well.  The price action reversed and was consolidating at the EMA.  An aggressive long BOT was added.  This would allow for additional profit should price continue bullish.  But notice around b273 (9:05).  We have a bear "resistor" bar,( coined for it's appearance-looks like an electronic resistor) followed by a bullish failure at the A-BOT.  These candles, and wicks on the prior two, are suggesting we have resistance at the A-BOT.  That's what the market eventually discovered; we knew it earlier when the aggressive BOT was added. If a long BOT fails, traders are looking for contra short, which the market eventually confirms.

Even if you did not short the A-BOT, the EMA was resistance and price broke the short BOT at the open.  The TL that followed would potentially yield another+10 and a stop exit near 4170.

The next potential was the bullish channel.  Longs would be looking for HL at/near the TL . As for shorting,  personal preference would be to wait for the short BOT, and we see a failure for the BOT around b50-51.  Hint: notice another resistor bar just below the bot at b50.  This would be a short with confidence.  We have a short BOT, and an upper TL to the channel failure. Again, more conservative shorts took the EMA failure.  This created a potential TL short with an exit in the 4150-4155 area.


TODAY:  ES

The ES and the 6E appear in sync now.  Being in near sync or being opposite in direction is importance to know.  The ES was selling in the Euro Zone market, and we noted a bear control bar when we opened post in the chat rooms.  Essential, control bars are extended in range, will have price consolidate at either extreme, and price over the next 4-8 bars (average, an be longer) will trade inside the control range.  Today, the long BOT coincided with the top extreme of the control bar.

Price continued to sell moving to our short BOT, which we know is considered support.  thus part of the importance of a break.  The long BOT is viewed as resistance.  The short BOT and the long BOT fails, as price consolidated near the control bar range.  By the open, the long BOT and the control bar have contained the bull.  The EMA is your short, if you missed the FBO of the long BOT.

1335 is an important level.  A break is significant.  Bears win until we find buyers  near 1329.  A long would be acceptable at the HL on the TL at b33.  Exit of all or part would be at the short BOT.

Next?  Price runs to the BOT range, and again fails to break long.  Shorts could enter at the FBO and most likely would exit all or part at the EMA.  The high probability short is at the EMA failure, the MAXT just below the short BOT.