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Wednesday, April 20, 2011

"The pulse of the patient..."


     Below are five 3-chart grids of the YM, ES, NQ, TF & NKD. The only items showing are candles, volume and the pivot point of each candle (represented as a short thick horizontal white line through each candle).

     The left chart is a Daily one, with the last candle being yesterday's. The middle chart is a 5 min (market hours only) one which shows yesterday's and today's data. The chart on the right is another Daily one which includes today's candle.

     You can see from the middle chart how price traded intraday in comparison to yesterday's Daily candle on the left chart and where it found various points of support relative to the pivot point on the Daily candle...as it happens, it gapped up on the open and failed to fill the gap. As well, you can see from the middle chart how each 5 min candle traded relative to the preceding 5 min one and its 5 min pivot point.

     This is something that I'll be trying to observe and analyze more closely throughout my trading day so that I can, hopefully, better identify turning points on whatever timeframe I'm trading with much better precision. I've shown the Daily & 5 min charts for illustrative purposes...this type of analysis could be applied to any timeframes. I'd like to use my scalpel successfully on my entries like a skilled surgeon would on his/her patient so that I don't end up holding the wrong end of it!

     With the Fed propping up the markets, it makes sense to me that I add this kind of analysis into my bag of tricks because higher and higher price prints seem to defy trendlines, channels, moving averages, overbought indicators, etc.

     I can only conclude that fair value ("the pulse of the patient") is the last closing price on each candle and not somewhere else that I think it should be. If I have any further insights on any of this in the future, I'll be sure to post it here.