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Emini Podcast / The Daily Futures 03/22/12

|Includes: DIA, GLD, PowerShares QQQ Trust ETF (QQQ), SLV, SPY
Emini Futures | Trend Line Basics Part 2

The S&P500 Emini Futures broke the trading range of the past 3 days. Our Weekly Trading Zones at 1403/1404 have held the top in check and there have been no hourly closes this week below our 1395/1396 Zone. Until today...

When we ended the Radio Broadcast yesterday we said the path of least resistance appeared to be down. A double top at the upper zone and our CF_MA1 overhead and falling were the only factors involved in that statement. Once 1395 broke and held, it was a quick drop to the next zone at 1387/1388 which became support for today's session. Using the same rationale in reverse, we suggested that the path of least resistance appeared to be up. That's a more difficult projection based simply on the laws of gravity. Tomorrow we'll all know the outcome...

S&P500 Emini Futures

S&P500 Emini Futures (NYSE:ES) 03/22/12

Trend Line Basics Part 2

Trend lines have 3 primary functions:

  • Trade Management
  • Entry and Exit
  • Timing the Market

The trend line is useful if it holds and also if it breaks. It can be used to buy the dip, sell the rally, or enter on a break. In other words, a valid trend line will always offer you a trading opportunity whether it holds or not. You simply need to be aware, and not become complacent. Anything can happen. Trade what happens, not what you think will happen.

Only 1 chart tonight. In fact, this is the exact same chart you see above. I've simply removed the noise and rescaled to highlight the trend.

S&P500 (ES) Trend Line

  • The trend is ____________?

When (if) price reaches the trend line, what can happen?

  • It can validate (3rd touch)
  • It can break

Please use the comment section for questions and to share with others how you evaluate this scenario when it happens. Keep in mind you should not feel compelled to simply trade the touch although you can of course, or you can wait to see how it reacts. This is an hourly chart - Patience Required! Remember the market is fractal in nature so you can apply the same concept to any time, volume or tick chart.

If this trend line does break on Globex tonight and price moves higher, watch for price to then possibly pull back after the break, to test the top of the trend line before continuing higher. We will discuss the outcome tomorrow morning in our Live Emini Trading Room.

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