WHEN A BO FAILS, TRADE THE REVERSAL

THE US is trapped in a spending train that is about to run out of track.  Euro Zone heads are trying to salvage the unity, and the Euro as debt issues are spreading and will require tons of help that will bring down the healthy.

All of this is akin to the so called carmagenddon in California, when they recently closed a major freeway for construction demolition.  The shut down of traffic never came.

On the financial melt down,  we simple need to minimize spending and get the current so-called tax system eliminated.  The revenue side will take care of itself as soon as we have a fair system where all contribute.  The tax system is broken when masses pay 0, and more masses receive refunds when they paid nothing into the system.  Unfortunately, governments know how to give it away, promise it away, but never seem to get the manage it away.

Our whole post war, post 60's economy has been built on credit: spending more than we personally had, wanting it today rather than tomorrow.  There will be changes, and we will continue.  The solutions will offer investing opportunities, just as the problems that got us here did.


TODAY:  ES AND TF

BOTs were calculated this AM, but modified slightly with the 7:15 action.  Interestingly, the original ES levels were 1307.75-1305.75-1303.  The 7.75 level was a key resistance for the long BO.

click to enlarge

The trading day began with a 50CB (50% of a control bar) long play toward the LB level, and the ultimate resistance at 1307.75.  At the open, it was noted in the chat room that there were some EMA buyers, but they would fail, as we were seeing a LB reversal short.

The long was the 50CB at b2, but again the 1307.75 area failed.  This LB reversal was for real.  When a BOT BO fails, we expect price to reverse and move to the opposite BOT level.

B8 and 9 were CB's.  The b9 50CB was a long on b10 until we see b11-12 pushes fail below the b8 50CB level.  This failure is seen as a bearish indication for a short.


[10:43] <Chartmaster>   a cb is current bar until replaced by another  however  in cases like b8 and b9  price from b9 cb50  will often reach near b8 cb50   and we look for a failure.  a continuation to or beyond b8 50 would be indication to continue holding long(or short if bars were in a reversed pattern)


B17-168 is a MAXT reversal,with a long at the 50CB. This was discussed in the chat. We expected price to hit the EMA near the B9 50CB.

[11:00] <Chartmaster> b17-18  50cb  and maxt reversal pattern
[11:06] <Chartmaster> pa hits ema where?  around the 50cb of the bracket

The FBO of the EMA was a short opportunity, but the actual short taken was at the b17 50CB reversal at b26.  That was an exit at 92.5 from the 50CB 95.5, just above the 10 point run from the short BOT.

[11:58] <Chartmaster> 1291 is +10 from sb at 1301
[11:59] <Chartmaster> and we are near midday  some bullish pb expected
[12:03] <Chartmaster> looking for another ema touch
[12:12] <Chartmaster> this bull should reach last 50cb/ema  95-95.25 area


Short by a tick, but the +10 from the SB was close enough.  The market found itself in a bullish channel.

[14:55] <Chartmaster> bulls will feel victorious with a close >1300
[14:56] <Chartmaster> extend upper ch tl  and we see 1301, the SB
[15:00] <Chartmaster> important level  SB  and ch tl  and we see it first

BOTs help us look forward to key levels which suggest trade activity.  Add BO's, FBO's, brackets, and 50CB's  for high probability trading.



TF TODAY:

[14:42] <Chartmaster> our TF friends made out like bandits today  with the SH bot bo  +5  +10

With the BOT's, the trade is laid out for us prior to the price move.  When it happens, the entry is clear.  No special bar counting, rules, exceptions, etc.  Nice and clean.  Take the trade.