Here's what an actual scalp looks like.

I normally don't include scalps on this blog because I'm in and out before there's any time to post. While swing trades last days and you can see I'm blogging about an ongoing actual trade. But this was a beauty and I really wanted to share it.

The chart above is the 3 minute PNW stock chart I used to trade it. To the bottom left you'll notice a triple bottom. Then a nice leg up followed by consolidation. 

The angled thick white line segments is the AB=CD price projection. The D point is about 74.

I drew Fibs to cover the 1st leg up. You can see the 61.8% Fib Extension at 73.95.

Price broke out of the consolidation from about 11:00 - 13:00. That's when I entered the trade. This stock has terrible Options. Low volume and wide Bid/Ask spreads. So I needed to use the stock. Since we're trading over a small price range on the 3 minute chart, we'll need a decent amount of stock, but its a Friday afternoon and I didn't want to risk too much, especially with all the headline risk these days.

I bought 200 shares at 13:37 for 73.20 each. I put my stop under the 20sma and under the top of the consolidation area. Subsequently, a beautiful Cup and Handle pattern was formed. I drew the the thick white, mostly horizontal brim line, which eventually intersected the Handle. You estimate the measured move by drawing a vertical line from the brim line to the bottom of the cup, then copy that line and place it on the breakout level of the handle (see the little vertical thick white lines). This projected a move to about 73.90.

Notice the beautiful confluence of 3 different methodologies:

AB/CD: 74

Fib 61.8% Extension: 73.95

C&H: 73.90

The target was the 61.8% Fib (73.95) Ext but I faded it by 5 ticks (73.90) to line up with the C&H projection and allow room for slippage and Bid/Ask spread. Also it was getting pretty late on a Friday and I was suspecting price would fall a little short due to low liquidity and general market shenanigans.

Well, I was treated to rare perfect price action. It reached a high of exactly 73.90 at 15:18 and my Limit Order was filled. Then it tanked. Thank goodness I faded the 61.8% Fib!

In summary:

Entry 13:37 200 shares @$73.20

Stop 73.12

Target 73.90

Exit 15:18 200 shares @$73.90

Profit 73.90 - 73.20 = .70 * 200 shares = $140

Time 15:18 - 13:37 = 2 hrs 19 minutes.

I was also doing other trading related tasks while monitoring this trade. And lunch :)

This fill was the last trade of the day and the week, and it was such a pleasure. If only all our trades went like this one.

Dec Wheat Descending - Update 1

Yesterday was a Doji candle, closing under the 8ema. A Doji connotes indecision. Today a decision was made. More downside.

Today's candle makes another Bearish Engulfing pattern. This is the third in a row. Don't know the statistics on this but I'd guess its pretty uncommon. Certainly adds credibility to our bearish thesis.

However, we are now sitting right on the 200sma, as well as the bottom of the purple range and the top of the yellow range, and the 34ema. This area could definitely provide some support. So we may see a bounce Sunday night and Monday. If so, I'd expect a 50% pull back of the range from the recent swing high (578 1/4) and yesterday's low (541). That would be (578 1/4 + 541)/2 = 559.63. We have to allow the occasional and normal pullbacks. We have our Stop working, and if its hit, the amount is within an allowable risk. If we get a pullback and a reversal back to our downward trend, we'll continue towards our target.

So all in all, our trade is progressing nicely. Its an easy decision to remain in this trade.

YM Dec Dow Jones Futures Near Term Target - Exit

3 minute

Daily

First target (26500) was hit 8:37am ET. Then I zoomed into the 3 minute chart to micro-manage since its quite possible we don't go any lower for days. I trailed a stop behind the top of the second candle behind the current candle. The stop was hit at 8:46am ET on the other 2 positions at 26516.

Since this was a trade on the Daily and covering a wide price range on a volatile chart, we used the MYM mini contract ($0.50/point) instead of the full YM ($5/point) contract.

So, the happy summary is:

27001 Entry - 26500 Exit = 501 x $0.50/point = $250.50

27250 Entry - 26516 Exit = 734 x $0.50/point = $367.00

27364 Entry - 26516 Exit = 848 x $0.50/point = $424.00

Total win $1,041.50

YM Dec Dow Jones Futures Near Term Target - Update 1

How beautiful is that?! Price action went in our favor big time. But wait it gets better.

You can't see it on the chart because I don't include after-market data on the YM Daily chart so I can see the overnight gaps, but last night I added a Sell-Stop at 27250 and 27364. 27250 corresponds to the H&S Neckline, which might get hit on the way to the 8ema. 27364 corresponds to the top of the gap, made by the low of 3 trading days ago. 27250 was hit at 20:01 ET last night and 27364 was hit 04:39 ET. The original 27001 entry was yesterday 06:13am ET. 

Then, after the 2 additional scale-in orders were hit, look out below. We closed today at 26685. How beautiful is that?!

On the way down we have 3 scale-out orders to cover at 

26500 - Bottom of AB=CD projection.

26386 - Half the H&S projection.

26250 - The 61.8% Fib Ext.

If we get another candle tomorrow like we had today, which would be asking a lot, we're likely to hit all 3 targets and be out before the weekend. But we'll probably get a partial retracement or a Doji candle tomorrow. 

Dec Wheat Descending

This is a very busy chart. The trick is to focus on just the indications you're interested in and filter out the rest. Then do it again for the next indicator. This is also a bearish chart, although we entered without confirmation of the next candle continuing downward. So we did enter a little early. But look at the multiple indications of a more downside:

Let's start with the Negative Stochastics Divergence. Notice the 2 orange angled line segments. One connects the tops of the 2 most recent swing highs. Notice that line is angled upward. The other line is in the Stochastics window on the bottom of the chart. It connects the tops  of the 2 most recent swing highs for Stochastics. Notice that line is angled downward. That is a Negative Stochastics Divergence. It portends a short term down trend.

Today's candle and the candle before it form a Bearish Engulfing candle pattern. That is a bearish indication. In addition, the 2 candles before those 2 also form a Bearish Engulfing candle pattern. That adds to the bearishness.

We closed today below the 8ema. That is a bearish indication. However, we should confirm this with the next candle continuing lower than today's low. I expect that will be the case tomorrow. Until then we are early. Entering early adds risk that the trade will go against us and fail. We entered early on purpose, knowing the risk, because we could get a big candle, like 2 days ago, or gap down, and hit our target before we get a chance to enter. Also, I could be unavailable tomorrow morning and miss the opportunity to enter. To help mitigate the added risk we used the mini contract ($10/point) instead of the full contract ($50/point). We can scale in with more contracts after we get confirmation, if there's enough room left between the new entry and the target.

The 20sma often provides a headwind. So closing below the 20sma is a good sign.

We bounced off the 27.2% Fibonacci Extension on the green range 2 days ago. The green range is shown by a large green vertical down arrow around July 21st.

We also bounced off the Inverted Head & Shoulders Neckline (thick light blue line). 

If you look at the most recent swing high at 578 1/4, which is also the top of the blue Fib range, and look left you'll notice this price range was rejected on approximately 3/31/20 and 2/21/20. So twice before this price level provided resistance, and it happened again today. This is a bearish indication.

So, given all these bearish indications, it seemed like a good trade would be to enter short today rather than to wait for confirmation, as explained above. Here's the trade plan:

Use Dec YW mini contract ($10/pt).

Entered 548 1/4.

Target 61.8% Retracement of the blue range at 528. Actual target is 528 1/2 for slippage.

Stop 578 1/2 (just over the recent swing high 578 1/4).

Risk: 548 1/4 - 578 1/2 = -30.25 * $10/pt = $302.50

Reward: 548 1/4 - 528 1/2 = 19.75 * $10/pt = $197.50

Well, that R:R stinks. I believe this is high probability trade, so I'm going to tolerate the bad R:R. We already used the mini sized contract which cuts our loss potential by 80% compared to the full contract, but is there something else we can do?

Sure, we can tighten our stop to break even when we get to the 50% Fib retracement, which is very close to the 50sma, both of which can provide significant support, and might be all the downward price action we get on this trade.

YM Dec Dow Jones Futures Near Term Target

YM Dec Dow Jones Futures daily chart above shows a Head & Shoulders pattern (yellow). We broke and closed under the neckline. I have found price often goes to 50% of the Head & Shoulders projection. In this case that is about 26386.

The angled white line segments show an AB=CD price projection, which is about 26500.

There's a gap from 26326 - 26233. So the gap fill would go down to about 26233.

A 61.8% Fibonacci extension of the Head - Neckline range (green) is 26247.

On the scope of this chart, these 4 levels are relatively close to each other, so a price target in the range of 26500 - 26233 is indicated. I think the best target is the 26247 61.8% Fibonacci extension. But what I'd like to do is scale out a quarter position at each level. 

We could leave a small position on as a runner for a bigger move, but I expect the 4 possible support levels mentioned above, plus a previous consolidation area in this same range around July 15th - August 4th, will cause price action to reverse, at least temporarily. Then when that reversal tops, we can re-short. If we do get a reversal then a runner will just give us a loss, so I'd rather not put it on.

Oct Natural Gas Deflating - Exit

 

How to risk $12,000 for 9 days, do everything right, and make $25.00! That should be the title of this trade. Well, I must of done something I thought was right, but maybe it wasn't. Of course, traders can do everything right and still lose money due to the randomness in the market. So I should be happy I ended positive, right? Let's take a look at it and see if there's something to learn for the future.

First, let's discuss the exit. Yesterday I said I'd micromanage the exit in the morning. I woke up to find a consolidation channel. I waited until a likely breakout showed up around 8:30am ET. Here it is on a 10 minute chart:

You can see 2.320 would be a good Stop. Its just over the top of the consolidation. So when we got the breakout I lowered the Stop to 2.320. Well, you can probably guess what happened next:

Stop was hit 9:05:45 am ET. We covered at 2.325. I really didn't mind that much. I was glad to be out with what felt like a nice profit. We could have easily been hit at 2.410 instead, or something worse earlier in the trade.

But look at the Daily chart above. It was captured after the close. The low of the day was 2.246, landing right on the 50sma. You might remember yesterday I raised the target to 2.250. If I didn't try to optimize the exit, the exit would have optimized itself. Would have been perfect! Would have made an additional 2.325 - 2.250 = .075 x 2500/pt = $187.50.

The final net on this trade without commissions:

2.475 - 2.325 = .150 * 2500/pt = $375 core position

2.485 - 2.580 = -.095 * 2500/pt = $-237.50 second position

2.425 - 2.410 = .015 * 2500/pt = $37.50 trying to add back 2nd position but hit stop

2.365 - 2.425 = -.060 * 2500/pt = $-150 trying to add back 2nd position but hit stop

375 - 237.50 + 37.50 - 150 = $25

I went back and read all my posts in this thread looking for something to improve. Don't see anything wrong with the entry. The fact we came so close to the target supports the validity of trade setup. 

One improvement I see is to check other time frames before entering the trade. I only noticed the Head & Shoulders pattern on the 4 hour chart after we had already entered the trade based on other indications. What if there was a counter-indication? Don't want to find that after entering the trade.

When price went against us in update #3, I think taking off half our position was the perfect move. In fact, price came right back down the next day, so good thing we still had our core position. We definitely would have lost ground trying to get back in. Don't see an improvement here.

Another improvement is where I put the Stop when adding back in the supplementary position. I was using the 10 minute chart to enter, so I used the 10 minute chart to set the Stop. That seemed prudent and cautious but now I think it was a mistake. I should have used the Daily chart to set a Stop like I did when we first added a supplementary position after seeing the Head & Shoulders. It means much more of a loss if its hit, but if I had done that we would have made an extra 2.425 - 2.325 = .1 * 2500/pt = $250 instead of losing $112.50.

Is micromanaging the exit on a 10 minute chart when we're close to our target a mistake? Sometimes price pulls back just shy of a target, and doesn't come back. I usually shade my targets by a couple/few points to handle a near miss as well as bid/ask spreads. I suppose there are some trades that are better left alone, but this wasn't one of them. There were many possible reversal points and an observant trader could manage that situation to a better outcome than just letting things play out on their own.

Not seeing anything else at the moment. If you see something in the managing of this trade that could be improved upon, please let me know. Meanwhile, guess this counts as a win.

Oct Natural Gas Deflating - Update 6

 

This morning at 10:30am ET the EIA Nat Gas Storage Report was scheduled to come out. I tightened our Stop Loss to 2.450 in case we got a big bullish surprise. At 9:17 I lowered it further down to 2.410, which is just over today's high. 

At 13:00 ET I raised our target to 2.250. This is more centered in the group of possible support levels that could be the reversal point. Stochastics are oversold now and we don't want to miss our exit right before a fast bounce back up. The 2.225 was a good initial target and it may will get hit, or price could continue significantly further down. But now that we're near, we can see where the support levels are:

• The AB/CD projection (thick yellow angled line segments) suggest about 2.277.
• The Head and Shoulders projection (purple thick vertical line segment) suggests about 2.250.
• The 50 SMA (curvy thick red line) suggests about 2.245.
• The previous swing low on 8/12/20 is 2.228.
• The 50% Fib retracement of the green range is 2.222.
• The 61.8% Fib extension of the yellow range is 2.212.
• The 200sma (very long wavy horizontal thick white line) is 2.182.

We are trying to get as much profit as possible. If we set our target too low then we have to chase the reversal. If we set it too high we miss out on additional price movement in our favor. Picking the exact bottom before it is established is nearly impossible, although I have done it many times, but I wouldn't argue if you said those occasions probably had some element of luck. Where the luck isn't in my determination of the target, but rather that the market respected the support level I picked and with high precision.

My plan is to use the 2.250 target, then if its approached after I can get to my computer in the morning, I'll go down to the 10 minute or maybe even the 3 minute and micromanage the exit the best I can.

2.250 isn't the highest target but it is near the top of the target set. My temptation is to use the highest target to minimize the chance of missing the reversal. Of course, price could reverse before hitting any of these targets. 

The nightmare is that prices drift up overnight and hit our 2.410 Stop. Its up to the Trading Gods now.

Oct Natural Gas Deflating - Update 5

 

The top chart is the Daily and the bottom chart is the 10 minute for the whole day. You can see we got a bit of a retracement. Just about touched the 8ema then retreated. 

Yesterday I said "I think there is a reasonable chance for a partial retrace overnight and maybe into tomorrow." Well that's exactly what happened. So I wanted to add another short position. I did, but I used a stop based on the 10 minute chart rather than the Daily chart to control risk because that big pop we got this last Friday was a sign we need to feel some doubt on this trade. You can see the 10 minute was a bit choppy. I actually added a position twice today, but both times it hit the Stop Loss. Ended up losing $112.50.

So we still have just the original core position. The good news is we closed near yesterday's close, and under the 8ema and even the 3ema. We're still on track for our target. Although, Stochastics are getting a little oversold and we're hitting possible support at the 34ema and a previous swing high around Aug 5th - 10th.

We could get a significant bounce to retest the bottom of the channel trend line. That would put us above our 2.475 entry and in negative territory. I think that would be a bad idea in this trade. So, I lowered our Stop to 2.450. We'll see what the morning brings.

Oct Natural Gas Deflating - Update 4

 

When people say "I hate to tell you I told you so" what they mean is they are loving the fact that they can. In my previous post I was wrestling with what to do about the significant reversal, and I mentioned "I've seen many trades that do a quick 50% reversal, then resume the original direction." Hello :) Check the chart of today's action shown above. That's exactly what happened. So, at the moment I'm happy with how I handled last Friday's adverse move. But of course I wish I hadn't exited the second position. That's just a wish. I think I did the right thing by taking off half our position and cutting our risk while preserving a core position to benefit from the resumption of the trend.

The Nat Gas market wasn't completely closed yesterday. It was open until 13:00 ET. Not sure if that makes a valid candle or not, but when combined with Friday's candle they make a Bearish Harami candle pattern. Then today we continued the drop and closed below the 8ema, 20sma, Head & Shoulders Neckline, previous swing low, and the 34ema. This is a relatively large candle and with good volume, so we seem to be back on track to our target.

There's the question of whether to add to our short position. Being that this is a large sudden move, I think there is a reasonable chance for a partial retrace overnight and maybe into tomorrow. I'd like to wait and see if that happens. If it does we can add a position at a higher, more advantageous level. If it doesn't, we'll see if there's enough room left to our target where it makes sense.

Oct Natural Gas Deflating - Update 3

 

When it comes to the markets, "Anything can happen, and it usually does".

And here's another quote, from my original post on this trade on Sep. 2nd:

"This Friday will probably bring a difficult choice because this weekend coming up is a 3 day weekend in the USA"

Anticipating this didn't help much when it came to fruition. Look what happened today. We started down, breaking through the Trend Line. Great, this was in our favor and very welcome. But we bottomed out around 10:00am ET and trended up the rest of the day. We broke through the Head and Shoulders Neckline and the 8ema, and closed near the top. The bobble I discussed yesterday has resolved to the upside. Not what I was expecting nor wanted.

Notice today's bullish candle body engulfs the previous day's Doji body. That makes these 2 candles a Bullish Left/Right Combo candlestick pattern. Of course this is a bullish indicator. Also, we are resuming the up trend outlined by the channel we've been in. And Stochastics are mid-range, so we're not seeing pressure from being overbought. 

Apparently the appropriate action is to exit this trade, especially facing a 3 day weekend, right? Well maybe, but let me give the bearish side of this trade. First, we have a ton of bearish indications as of yesterday. Maybe we shouldn't just abandon all that so quickly.  The other thing is that I've seen many trades that do a quick 50% reversal, then resume the original direction. You can see we made a high today within the yellow range between 50% and 61.8%. I drew the yellow range to cover the previous down leg on the Daily chart. If this is one of those trades that does an annoying partial reversal before resuming the original direction, then it would look just like this chart. What matters now is how the next trading day goes. If it continues up, then we're scr.., uh... out of luck. If we see that, we'll have to exit the trade. The Bullish Left/Right Combo is a real thing to be respected.

So, since everything hinges on how price goes next, and I think we're looking at a 50/50 proposition, do we really want to just completely exit the trade? Its possible we gap down and continue down on the next trading day. So saying we should exit now because we can always get back in, isn't quite true. A significant gap is more likely after a 3 day weekend than a 2 day weekend. We could get back in but we could lose a lot of ground (meaning profits).

Conveniently, but maybe not fortunately, we have a double sized position on this trade. So what I did is to wait until the last minute today to see if we'd close under the 8ema, then when we didn't, I covered half the position (the second position). The original position is still on. So we reduced the risk and retained our opportunity to profit from this trade. 

If NG continues up the next trading day and hits the 2.685 Stop vs getting out today at 2.580 we'd lose about another $250. If NG has a bearish day then we can add that position back on, maybe at a less advantageous level but still a potentially profitable one.

So, bottom line is we lost some money today to prevent a bigger loss.

Sold at 2.580 at 16:57:57 ET:

2.580 - 2.485 = -0.095 * $2500/pt = -$237.50

Oct Natural Gas Deflating - Update 2

 

We definitely took some heat from about 5:00am ET until the day session open. You can see it represented in the chart as the upper wick on today's candle. Having doubled my position last night, the unrealized loss started to look rather threatening. I'm thinking I can't believe such a great looking short setup is going to reverse and hit my Stop. But I just held on and sweated it out. 

I was so thankful the way we closed the day session. We closed today's candle as a Doji, which represents indecision. Looking at yesterday's and today's candles, both Doji's, it seems we're bobbling between the 8ema and the Trend Line forming the bottom of the upward channel that started around July 21st.

But, both days we closed under the 8ema, under the Head and Shoulders Neckline (on the 4 hour chart in the previous post), and under the 20sma. Look at how the Stochastics are accelerating downward. Everything we've said indicating a downward trend is still in place. Nothing has been invalidated.

So we continue to tolerate the consolidation here, expecting a breakout down through the Trend Line and a close below it. At that point we either wiz on down to the target, or we temporarily reverse to test the underside of the Trend Line, then continue back down. Well, anything can happen, but those two courses of action seem the most likely.

Oct Natural Gas Deflating - Update 1

 

I was checking on this trade at 10:00pm ET after we entered this trade earlier today, and decided to take a look at the 4 hour chart. Check out the bonus we got! The purple lines show a beautiful, symmetrical Head and Shoulders pattern.

The vertical purple line on the right is a projection of where price is likely to go. Notice its very close to the 50% Fib target. This reinforces all the other bearish indications listed on the previous post.

So given this new bearish pattern on the 4 hour chart, I added a trade. Short from 2.485, Target 2.250 (the H&S price projection), Stop 2.685 (just above the .shoulder at 2.675).

Risk: 2.685-2.485=.200*$2500/pt=$500

Reward: 2.485-2.250=0.235*$2500/pt=$587.50

R:R=1:1.18 (not great but a Head & Shoulders is a high probability pattern, and we have a slew of other bearish indications)

The total Risk for this trade is now 562.50+500=$1062.50

The total Reward is now $625+587.50=$1212.50

Oct Natural Gas Deflating

Shorted Oct Natural Gas today at 2.475, using the QG mini-contract, which is 25% less than the full NG contract. 

Here's why I'm bearish:

• Rejected off the upper Trend Line.
• Reject off the upper Bollinger Band.
• High Stochastics.
• Bearish Harami candle pattern.
• Doji sandwich candle pattern.
• Close below the 8ema.
• Continuation/Confirmation to the downside today.
• Heavy volume.

However, there is a risk of support from the bottom Trend Line, which is coincident with a previous Support/Resistance area. Additional possible support from the 20sma and 34ema, as well as at the 38.2% Fib which is in the middle of a previous Support/Resistance area. But after 5 price cycles (pullback followed by an advance higher), with pegged high stochastics, a 50% retracement of the full 5 cycles seems likely.

Target is the 50% Fib of the green range = 2.222, just above the 200sma, 50sma, and lower Bollinger Band.

The chart was captured 14:27 ET, and the NG market day session doesn't close until 17:00, so this may be considered a little early. However, we did get a close below the 8ema followed by confirmation today, which satisfies my entry criteria. It looks like a high probability trade.

This Friday will probably bring a difficult choice because this weekend coming up is a 3 day weekend in the USA. I don't like holding over a 2 day weekend, or even a mid-week 1 day market holiday for that matter :)

Entry: 2.475

Target: 2.225 (2 ticks above the technical target)

Stop: 2.700 (just above the previous candle's high)

Risk: 2.700-2.475=0.225*$2500/pt=$562.50

Reward: 2.475-2.225=.250*$2500/pt=$625.00

R:R=625/562.50=1.1:1 (not great but it looks like a high probability trade)