My conclusion is, that it might be safe to play the bounce from the right shoulder to the neckline, after that I would be extra cautious.

With the current pullback in the stock market, most of the companies have reached buying levels. Others have breached below their support levels and headed lower and some have already reached their targets.

The most remarkable calls were in CPE and DSPG. Check out the charts:

The DSPG stock has made a pullback right to the entry point at 5.80 and then reversed all the way to 7$. It looks like it has some steam left. My target would be 7.75 before any rebound.

CPE has risen more than 40% since my call.

Here is the list of the remaining stocks to watch this week:

NTRI
TRA
AGU
TSO
VLO
PETD
ALY
OMNI
CFW
NGAS
WNR

Here is another stock similar to CPE:
KAZ - a US registered company ingaged in oil production and exploration in Kazakhstan. BMB Munai operates under its wholly owned subsidiary Emir Oil. The company is engaged in the exploration, development, and production of crude oil and natural gas. The Aksaz, Dolinnoe, and Emir oil and gas fields in western Kazakhstan serve as the primary areas for exploration and development. It transports oil and gas via rail, barge, and pipeline through Russian territory.

Although the stock is losing its steam and there is no follow through in price, it is strong fundamentilly. With the market Cap. of ~60$ mil. it has 250$ mil. of proven oil and gas reserves.

I have gone long at 1.20$ and planning to hold this one forawhile. Next week they will aanounce their 3rd quarter results, that should be interesting.

Here is an example with EUR/USD pair:

Even though the medium term chart has turned bearish, in the longer term we are still in the bull mode. So, you decide to go long EUR at some point. So, you start the analysis with a 4- and 1-hour charts.

On the chart above you see the first signs of a possible turnaround – a MACD divergence and that the price is testing resistance point. Being an experienced trader, you understand that if the price breaks above the resistance at 1.4680, then according to Wyckoff Schematics it can run as high as 1.4900. So, you don’t want to miss the train. You start looking for an entry point with the best Risk/Reward ratio and zoom to the 15-minute time frame.

The 15-minute shows us that a reversal is highly possible, and in fact the price has already tested the resistance at 1.48. Now it has pulled back to a 50% Fibonacci retracement, making 1.4650 a perfect spot to enter a long trade with a good R/R ratio.

The last step is enter the trade. For that you zoom to 1-minute chart and place a buy order somewere between 1.4652 – 1.4647. Then you place a tight stop of 15 pts.

The trade above has not only great R/R potential, bu it is also a stress free one:

• You know that your odds of winning are high.
• You have a predetermined stop in place, which protects you from further losses in case things go wrong.
• This short term trade has a potential to become a swing trade with more than 1/10 Risk/Reward ratio.

In conclusion, I’d like to add that this is the type of trades you want to make each time – stress free, with high reward potencial. There is no need to rush in every trade you see, just be pacient enought to look for the best ones, and you’ll see your account growing expotencially.

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Here is a more detailed analysis why 1088-1090 was a good buying point

1. This is a classical “spring” according to Wyckoff Schematics. To find out whether this was a turning point, I used other tools, like MACD Divergence, which really helps to find possible short term tops and bottoms, and classical pattern recognition – we had a really nice double bottom on 5-min chart. Also, as I have written before, the Double bottoms in GOLD and EUR/USD also indicated a hight potencial in reversal.
2. This is a 50% Fibonacci retracement level. A good area to add to your longs or to enter a new position.
3. I am looking for 1107 as a first target. Again, no fancy indicators used. I was thinking of that level as a good target, because it was a previous pivot point. But now I am more confident in this level, as we have Cup and Handle Built, and according to textbooks, the next target equals the high of the Cup. So, in case you have no position right now, you might want to get in for a nice 10 pt. profit.

That was a really quick rice from the support area at 1004-1006. Next tough area to take out is 1017-1018. It is a classical support-turned-resistance situation. If the resistance holds, then we will be looking at Inverted Head & Shoulders pattern with the price target at 950-960.

I don’t wont to be a hero here, so when we get to  the 1016-1018, I will close my longs.

What seems to be chaotic price action intraday, looks quite nice on a longer timeframes. Some support/resistnce levels to keep in mind for now:

870 – support 1

860 – support 2

880 – resistance 1

890 – resistance 2

Actually pullback to 860 would have been very healthy for the market to continue its move higher.

This is a big mistake. The midday markets are a great time to play slow-lane strategies that take advantage of the crowd’s impatience. Trade fills during this period also benefit from compressed spreads and more favorable reward-to-risk ratios. Moreover, it’s easier to make profitable decisions after watching the bull-bear struggle that guides the first hour of trading.

First-hour ranges set up natural observation levels for midday traders. A late-morning breakout through the first-hour range signals a trending market. This thrust can trigger a series of moves in the direction of the break. Alternatively, when price remains stuck in its first-hour range into the lunch hour, it’s unlikely the midday crowd will have the power to break its support or resistance. Midday price action often tests the trends established in the first hour.

As the day progresses, a significant reversal of first-hour sentiment becomes less likely. While this early trend remains dominant on most days, midday shocks still generate contrary price movement. These sudden events can shake weak hands out of very good positions. Here’s an example. An opening gap sends a market higher and attracts heavy volume. Price holds its own for a few hours after the opening, but then sells off with no warning during a midday shock. Midday traders can jump quickly into this falling market and take the stock at very advantageous prices. Watch out for trouble during Wall Street’s lunchtime period. As the big boys head out to fill their stomachs, the second squad plays a variety of games to generate volume and test supply and demand. Sharp whipsaws or short squeezes often characterize this midday testing period.

The bottom line: Trust nothing you see or hear during the lunch hour. But the lunch hour provides attractive exits when the games benefit open positions. Opposing trends often stop dead in their tracks just before noon so that their peculiar influence can rise to the surface. Take a moment to guess which side has the biggest target on its back at this time, and then skew your trading to take advantage of the weakest hands. The midday markets present one common danger to the bottom line.

Trades taken during this period must show sufficient movement to generate profits or losses. New positions lacking volatility generate risk as the last hour draws near. The trick is to get a few cents in your favor before other traders return from their golf games. You’ll probably need that breathing room to keep the position into the closing bell. Dead markets work fine when you’re building longer-term positions. But they rob profits if you’re looking for a quick buck.

Examine early volume to decide whether anyone really cares about the stock you want to trade. Measure short-term price movement as compared to prior days. Narrow ranges can subject intraday positions to significant end-of-day risk. Many eyes watch markets that are trading near their highs or lows. Movement into these price levels will invite the crowd to jump in or head for the exits. But don’t be fooled by small penetrations of these intraday extremes. Professionals know that stops build up at these levels and will take them out, regardless of their ultimate positioning. Experience suggests the best midday results come from buying weakness on uptrends or selling strength on downtrends. This acknowledges how difficult it is to transform a range-bound market into a trending one.

Because 80% of all price movement is range-bound, fading the edges plays the highest midday odds. Professionals measure supply and demand during the 2:30 p.m. EST to 3 p.m. time period in anticipation of a rally or selloff in the last hour. Midday traders should terminate positions if their short-term strategies can’t capitalize on the market’s final hour. Still, if you are able to stay positioned into the madness can work out very well. This volatile period often provides unexpected opportunities for very profitable exits.

At the same time the most important thing we learned in 2008 is that every rule has its exceptions. The same thing is with trading during shortened week.

For most traders it is a problematic environment to trade because of the lack of volatility, as most  market participants are taking this week off to spend more time with the family, relatives, etc.

The same thing happened this year, still the markets were quite tradable. Especially for those, who were patient enough to wait for a setup and had a game plan in mind. Here is a chart with possible setups:

You just needed to follow the trend.

As the saying goes: Don’t hate the Game, hate the Player.

Phase A
In Phase A, demand has been dominant and the first significant evidence of demand becoming exhausted comes at point 1 at Preliminary Supply (PSY) and at point 2 at the Buying Climax (BC). (See the chart above.) It often occurs on wide spread and climatic volume. This is usually followed by an Automatic Reaction (AR) and then a Secondary Test (ST) of the BC, usually on diminished volume. This is essentially the inverse of Phase A in accumulation. As with accumulation, Phase A in distribution may also end without climactic action and the only evidence of exhaustion of demand is
diminishing spread and volume. Where Redistribution is concerned (a TR within a larger continuing downmove), we will see the stopping of a downmove with or without climactic action in Phase A. However, in the remainder of the TR the guiding principles and analysis within Phases B through E will be the same as within a TR of a Distribution market top.

Phase B
The points to be made here about Phase B are the same as those made for Phase B within Accumulation, except clues may begin to surface here of the supply/demand balance moving toward supply instead of demand.

Phase C
One of the ways Phase C reveals itself after the standoff in Phase B is by the “sign of weakness” (SOW) shown at point 10 on Schematic 3. This SOW is usually accompanied by significantly increased spread and volume to the downside that seems to break the standoff in Phase B. The SOW may or may not “fall through the ice,” but the subsequent rally back to point 11, a “last point of supply” (LPSY) is usually unconvincing and is likely to be accompanied by less spread and/or volume. Point 11 on both distribution Schematics 3 give us our last opportunity to cover any remaining longs and our first inviting opportunity to take a short position. An even better place would be on the rally testing point 11, because it may give us more evidence (diminished spread and volume) and/or a more tightly defined danger point. An upthrust is the opposite of a spring. It is a price move above the resistance level of a trading range that quickly reverses itself and moves back into the trading range. An upthrust is a “bull trap” – it appears to signal a start of an uptrend but in reality marks the end of the up move. The magnitude of the upthrust can be determined by the extent of the price move to new highs and the relative level of volume on that movement. Looking now at Schematic 3, Phase C may also reveal itself by a pronounced move upward, breaking through the highs of the TR. This is shown at point 11 as an “Upthrust After Distribution” (UTAD). Like the terminal shakeout discussed earlier in the accumulation schematic, this gives a false impression of the direction of the market and allows further distribution at high prices to new buyers. It also results in weak holders of short positions surrendering their positions to stronger players just before the down move begins. Should the move to new high ground be on increasing volume and “relative narrowing spread” and then return to the average level of closes of the TR, this would indicate lack of solid demand and confirm that the breakout to the upside did not indicate a TR of accumulation, but rather a formation of distribution. A third variation not shown here in schematic form would be an upthrust above the highs of the trading range with a quick fall back into the middle of the TR, but where the TR did not fully represent distribution. In this case, the TR would likely be too wide to fully represent distribution and there would be a lack of concentrated selling except in the latter portions of the TR.

Phase D
Phase D arrives and reveals itself after the tests in phase C show us the last gasps or the last hurrah of demand. In Phase D, the evidence of supply becoming dominant increases either with a break through the “ice” or with a further SOW into the TR after an upthrust. In phase D, we are also given more evidence of the probable direction of the market and the opportunity to take our first or additional short positions. Our best opportunities are at points 13, 15, and 17 as represented on our Schematics 2 and 3. These rallies represent “Last points of Supply” (LPSY) before a markdown cycle begins. Our “averaging in” of the set of positions taken within Phases C and D as described above represent a calculated approach to protect capital and maximize profit. It is important that additional short positions be added or pyramided only if our initial positions are in profit.

Phase E
In Phase E, the stock or commodity leaves the TR and supply is in control. Rallies are usually feeble. Having taken our positions, we must monitor the stock’s progress as it works out its force of distribution. Successful understanding and analysis of a trading range enables traders to identify special trading opportunities with potentially very favourable reward/risk parameters. When analysing a TR, we are first seeking to uncover what the law of supply and demand is revealing to us. However, when individual movements, rallies or reactions are not revealing with respect to supply and demand, it is important to remember the law of “effort versus result”. By comparing rallies and reactions within the trading range to each other in terms of spread, volume, velocity and price, additional clues may be given as to the stock’s strength, position and probable course. It will also be useful to employ the law of “cause and effect”. Within the dynamics of a TR, the force of accumulation or distribution gives us the cause and the potential opportunity for substantial trading profits. It will also give us the ability, with the use of point and figure charts, to project the extent of the eventual move out of the TR and help us to determine if those trading opportunities favorably meet or exceed our reward/risk parameters.

Money lost in the chop are the same color as money lost in the trend.

One of my main problems was to be unable to “stay the course”. Even when I had a strong conviction in market direction, I usually haven’t made any money at all or made too little, regarding the overall move.

Most of the times I exited too early was because of being afraid, that the price might reverse against me and my tiny profit might become a loss.

After exiting position without any good reasoning, I was just watching it reversing again and now going in my favor….the only difference was that I was so stoned, I couldn’t place any more trades and was just watching at the price going more and more in “my” favor.

After doing some thinking I have made a set of rules, how to deal with this problem:

1. Don’t over leverage.
2. Stay calm during the trade.
3. Never revenge trade (I know it’s a tough one)
4. Never overtade (this one might be even tougher)
5. Always have a plan what are you going to do after placing the trade (doesn’t matter whether it goes in your favor or not – this helps you to follow Rule 2).
6. Be patient – don’t chase the price, watch carefully till the price gets to your entry point (There will always be another opportunity).
7. Exit the trade only for two reasons – your target has been hit or the reason why you entered the trade is not there anymore (You may also ask yourself, if you opened this position under the new conditions).

For me, the most important aspect is being patient. You can’t really make money by “winning some, losing some” it just doesn’t work! Usually it goes like this: “winning some, losing a lot”. So, for me, the only profitable way to trade, was to place small number of trades with the clear idea of how I am going to manage it. Also my planning work helps me to stay out of the market, so I can’t do any stupid mistakes.

If you are struggling with same issues, try to define your own set of rules that would work for you. Stick it near your monitor and review daily. It will safe you a lot of nerves and money