August Natural Gas bottomed on the daily chart 6/25/30 - 6/29/20 with a Morning Star on low stochastics and heavy volume. Then it made 2 legs higher, each followed by a pull back. Now the 2nd pull back looks like it bottomed today (7/15/20). Here's what I see:
Morning Star like candle pattern.
Bounce off the 20sma.
Bounced off the 78.6% Fibonacci of the light blue range (1.924-1.655).
Close over the 8ema.
Stochastics aren't as low as we'd like but still has plenty of room to run.
We rejected off resistance at the 50sma at 1.924. Since we already paid tribute to it then, odds are better we can break through it now.
All those things are bullish, but we still have to get through the 34ema, 50sma, and the previous swing high to reach our target. The target is 1.982 which is the measured move of the past 2 up legs (see the bold white angled line). This also coincides with 50% Fib retrace of the purple range (1.517-2.447).
Anticipating the pattern, which is not a prudent practice, and not waiting for confirmation from further up move tomorrow, which is worse than imprudent, I entered early at 1.745. This was clearly a failure of self-discipline. This kind of failure has cost me losses in the past. Its something I'm still working on. I've read in many places Traders tend to make the same mistakes many times before they master them. Here's an example. It's caused by greed. One of the two big profit killers. The other is fear. Impatience is another killer but easier to deal with than fear and greed.
I used the mini-contract (symbol QG on IB TWS). The full NG contract is $10,000 per 1.000 point while the QG contract is $2,500 per 1.000 point.
I have a Stop Loss at 1.700, just below the recent swing low.
Risk=1.745-1.700=.045*$2,500=$112.50
Reward=1.982-1.745=0.237*$2,500=$592.50
R:R=112.50/592.50=1:5 which is rarely excellent. (Helped by entering early.)
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