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PYRAMIDING WITH THE TREND
By Jim Robinson
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We're short 1 contract from a few days after the top
This is a good place to add a contract as this market is in a strong downtrend mode
HOW TO TELL A STRONG TREND
Bean Oil is in a strong downtrend mode
The Directional Movement indicator shows this clearly
The green line ( minus line ) has moved much higher than the blue ( plus line ).
The red ADX line is trending higher.(The ADX doesn't tell direction of trend, but the strength of the trend, a move above 30 is considered a strong ADX trend).
The ADX indicator is at 34.00 right now
4-9-18 EXPONENTIAL MOVING AVERAGES SHOW TREND
The 4-9-18 exponential moving averages are also showing a strong downtrend.
THE ENTRY POINT
The range on 1/15/03 was
Open - 20.15
High - 20.37
Low - 20.03
close - 20.09
The range on 1/16/03 was
Open - 20.13
High - 20.18
Low - 19.87
Close - 20.12
Todays action 1/16/03 Bean Oil made a new low and a higher close. This is a small pivot higher in a strong downtrend and a trading opportunity. If todays low is taken out that is a point to sell for a continuation of the downtrend
A FEW MORE DAYS RALLY
The 1/16/03 low could be taken out the next trading day - 1/17/03 - or also what happens alot is that the market will rally higher for a few days without trading below the minor pivot low just left behind. This would form a small bear flag on the chart.
However it plays out the point to go short is the 1/16/03 low at just below 19.87.
19.85 would be a good place to short this market as this would take out the low by just a little bit
THE PARABOLIC TRAILING STOP
The parabolic inidcator is a good indicator to use when you enter this trade
The parabolic stop is just above 21.00 right now and will move closer day by day.
OTHER PLACES FOR STOPS IF WRONG
Other stops to use would be a 3 or 4 day high because in strong trends the market will not take out the high of 3 to 4 days ago.
Also if the market rallied for a few days and made a bear flag then if it takes out the 1/16/03 low, the bear flag price high is good to use as the stop.
This is a low risk high profit potential trade. We will be using this a lot in 2003 in the daily commodity newsletter.
Disclaimer - All trades are extremely risky. I am not a financial advisor and there are no specific trading recommendations made in Commodity E-book 2002 material. The E-book and newsletter are for educational purposes only and is not guaranteed. Past Performance is not a guarantee of future profits.
Good Trading
Best Regards
Mark McRae
Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.
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