Slick Looking Gartley in Jan Soybean Oil - Exit

Well, guess I slipped on the oil slick and landed on my &^%$#@!. Price came down and triggered the new Stop at 37.28, then bounced. Guess what the low of the day was? How about 37.28!

This is the 2nd time I was disappointed by a Gartley pattern. So I did some more research and decided to play the Gartley Pattern differently in the future. Next time we go for Fib retracements of the AD range, like 50% or 61.8%. Then capture our profits and wait to see if a re-entry is warranted.

We would have realized several hundred dollars if we got out at the 61.8% or 78.6% retrace of the AD range.

Here's a nice graphic of the Gartley Pattern. Notice how it implies a target well above the A point. I understand that happens sometimes, but after the first 2 trades I'm setting much lower targets, and maybe get back in.

OK, another lesson learned. I've only actually used the Gartley once before, and it was recently. See https://jmstweets.blogspot.com/2020/11/live-cattle-looks-bullish.html and the updates.

The good news is, assuming price continues down to the original Stop, we did save $468 by raising our Stop. See https://jmstweets.blogspot.com/2020/12/slick-looking-gartley-in-jan-soybean.html

Bottom line:

Entry 37.70

Exit 37.28

Net 37.28 - 37.70 = -.42 * $600/pt = -$252. Put it in the loss column.

Slick Looking Gartley in Jan Soybean Oil - Update 1

Top chart is the 10 min at 7:20am ET this morning. The next chart is the same time on the Daily. We've come down to a low of 37.30, and the 61.8% retracement of our up leg is 37.35. We're below the Daily 8ema. All the other grains have been heading down and continue to look bearish.

I'm concerned we may have seen the high in the reaction to the AB/CD at 38.60. We just closed above the 10min 8ema, so we may be ok. But I'm moving the Stop up to just below the current low on the 10 minute chart, which is 37.28.

If the Stop is hit and things turn bullish again, we can always get back in. But moving the Stop will save us 37.28 - 36.50 = .78 * $600/pt = $468.

Slick Looking Gartley in Jan Soybean Oil

Found a beautiful Gartley Pattern (aka XABCD) on January Soybean Oil. These patterns are supposed to work about 70-80% of the time. I found other bullish indications as well. Here they are:

• Bullish Gartley
• Morning Star
• Close above 8ema and all MA's
• Bounce off 38.2% Fib on the green range
• Bounce off previous Resistance 12/29/2020 at 36.28

Target: There are 3 likely sources of resistance that all converge very near each other at 40.50:

• 27.2% Fib extension on the green range
• 161.8% Fib extension on the yellow range
• 161.8% Fib extension on the Gartley AD leg

Stop:Just under the D point of the Gartley at 36.50 .

I entered this yesterday but had no time to blog about it. Today was a beautiful follow through. See the chart at the top. Here's the summary:

Entry: 37.70

Target: 40.50

Stop: 36.50

Risk: 37.70-36.50=1.2*$600/point=$720

Reward: 40.50-37.70=2.8*$600/pt=$1680

R:R 1680/720=1:2.3 which is good

Soybean Oil Dec Short - Exit Update 1

I was looking back at this painful trade and realized where I went wrong. I somehow forgot to look left.

If you look at where this short trade reversed on Oct 5th, then look to the far left of the chart, you'll notice price bounced off a previous congestion (aka consolidation) area. I missed this when originally analyzing the chart. I could blame it on a number of distractions but it doesn't matter. Its up to me and if I miss something I will have to pay for it. Of course, I could miss nothing and still have a losing trade due to market forces such as news or a big trader deciding to get in or out or manipulate the market to execute a strategy. You have to expect losing trades when trading. Anything can happen. So making mistakes makes trading even more precarious.

The biggest lesson here is ALWAYS LOOK LEFT! A lesson I already learned but unintentionally didn't heed.

Soybean Oil Dec Short - Exit

Our 33.50 Stop was hit 2:24am ET. Good thing compared to no Stop or a "Mental Stop" because I was asleep at 2:24am. Not such a good thing when compared to the unmistakable Bear Flag Breakout pattern we had.

The thin white horizontal line at the base of the candle bodies at the swing low is the midpoint of the thick white angled line segment, which is the CD leg of the AB/CD projection. This is another example of the halfway point into a projected move being the extent of the move. Considering the Fibs near the 200sma and the bottom of the AB/CD projection, it seemed far more likely than the midpoint of the CD leg as the swing low. 

We exercised good discipline by not moving the Stop Loss or just exiting the trade but surprisingly the original setup, as aesthetically pleasing as it was, happened to be one of the smaller percentages of the time an AB/CD and Bear Flag Breakout  doesn't work out. Have to just accept it and look for the next trade where we might make our money back, and then some. It seems like the first trade setup you should take, but don't, because you think "I've taken some hard losses lately so I'll just watch this time", is the trade where you miss out on a large win that covers all your losses. If you believe in your methodology then you really need to take every valid setup.

The sad result of this failed trade is:

31.90 Entry - 33.55 Exit = -1.65 * $600/pt = -$990.

Soybean Oil Dec Short - Update 4

Shockingly we got the same candle today as yesterday. Its almost perfectly the same:

Yesterday:

Open 33.01

High 33.46

Low 32.80

Close 33.03

Today:

Open 33.03

High 33.45

Low 32.81

Close 33.00

It's so close it probably doesn't matter but today's High was 1 tick lower and today's Close was 3 ticks lower. The Low was 1 tick higher, but the Close is the most important. Like I said it probably doesn't increase our odds any, but it's certainly nice to see.

It's good our Stop wasn't hit today but 2 Doji's mean twice the indecision. I'd say it's because of tomorrow's big Grain Report at 12:00pm ET, but all the other grain futures, Corn, Bean Meal, Beans, and Wheat all made rather rangey moves, although no change in trend was demonstrated.

It doesn't make any sense to exit now. I suspect there won't be much price move between tonight and the report. So, being that our Stop is nearby, we might as well stand by and see what the reaction is to the report tomorrow.

Soybean Oil Dec Short - Update 3

We had a close shave today! In fact, it couldn't have been much closer. Our Stop Loss is 33.50 and today's high was 33.46. The fact that we came this close and didn't trigger the Stop helps dampen my paranoia about market makers running every Stop Loss they can find.

We may have gotten some help from the 20sma providing resistance. There's also congestion on the left around  8/27-9/9, but its spread over a large enough price range such that we can't pick a precise level. And of course our Bearish Flag from which we recently broke out to the downside could provide some resistance. But to come this close to hitting our Stop is amazing. Of course, we could easily hit it overnight or tomorrow.

Today's price action resulted in a tight Doji on the Daily chart. It closed over the 8ema. I would have preferred a nice big red candle with a close below the 8ema. But I'd much prefer a Doji (representing indecision between the Bulls and Bears) to hitting the Stop. 

At today's high we had an unrealized paper loss of 33.46 - 31.90 = 1.56 * $600/pt = $936. Ouch. The original pattern that seduced me into entering this short position was so beautiful and textbook that I never thought we'd ever get this close to the Stop.

 It surpassed the previous swing high at 33.41 by just 5 ticks then started down. Perhaps just enough to scare out the Bears and bring in the Bulls before reversing against them. You might say that's paranoia talking, but why do you so often see a slight new high followed by a quick reversal? I don't know the answer but it sure looks suspicious.

The top chart is the Daily and the next chart is the 4 hour chart. Notice on the 4 hour chart we closed just under the 8ema. Not by very much but it does provide some encouragement. You can also see Stochastics are very high. Another helpful circumstance for our short position.

Bottom line is I'm very grateful our Stop wasn't hit and we still have a chance to salvage this trade. This Friday 10/9/20 at 12:00pm ET we have a potentially impactful Grains Report coming out. So we need a big red candle tomorrow, Thursday night, and Friday morning to get as far away from our Stop as possible, to make room for a possible "false" bullish reaction to the report before a significant drop.

Soybean Oil Dec Short - Update 2

If yesterday's decision to stay in our short position was difficult, today's was severe. The top chart is a daily chart and below it is a 4 hour chart.

The Daily chart shows we went significantly above the 8ema and uncomfortably close to our Stop at 33.50. The worst thing is we closed much closer to the high than than the low. Combined with the previous 2 days' candles, it looks like a Bullish Engulfing pattern followed by a close above the 8ema. That is enough to close out the position.

However, we have not yet made a new swing high, and the bigger picture is we broke out of a Bearish Flag pattern and hardly went down at all. Also, notice we only made it down to the 38.2% Fib retracement of the green range. I've seen many times where a chart will bounce off the 38.2 Fib but then roll over and continue down to the 50% Fib of the same range. And that is where our target is.

Looking at the 4 hour chart, you'll see we're up against the 200sma on high Stochastics. If we roll over from here we'll make a new swing low on the 4 hour chart. That's a bearish indication.

This is a very difficult decision. Technically my rules say to exit and prevent further loss. But in this situation we're so close to the Stop that it won't be much of a financial difference whether we exit here or the Stop. So I decided the incremental loss of remaining in the position vs exiting now is worth waiting to see if the price action reverses when the market re-opens at 20:00 ET tonight, and avoid the loss altogether.

Well, the USA has rules (laws) written by the legislative branch but it was necessary to create the judicial branch to use judgement in applying those rules. So it makes sense there will be cases where it makes sense to bend my trading rules. (Wow, how's that for a rationalization not to suffer a loss lol). 

Soybean Oil Dec Short - Update 1

It looks bad. And it might be bad, but its not time to quit, even though we're down about $500 per contract. Today's price action created a Bullish Engulfing candle but we closed under the 8ema. We use the 8ema as a trend indicator. If we stay under the 8ema then we're still in a bearish trend. Its just a retest of the support we broke through yesterday.

Believe me, my brain is screaming get out before you lose more, but this is when discipline counts. So we left the position on. We can certainly continue up tomorrow, hit our Stop, and lose twice as much money as getting out today, but those aren't the rules and it would be an emotional decision.

Soybean Oil Dec Short

Price formed a Bear Flag and broke out through it to the downside. There are 2 good target areas.

Target 1 is the 50% Retrace of the green range (30.75), which is very near the 200sma (30.50). We're using 30.80 to be conservative.

Target 2 is the 61.8% Fib Extension of the yellow range (29.91) which is at the AB/CD (29.91) which is also near 61.8% Retracement of the green range (29.63). We're using 30.00 to be conservative.

Entry: 10/2/20 31.90.

Target 1: 30.80.

Target 2: 30.00.

Stop: 33.50 just above the bear flag high.

Risk: 31.90 - 33.50 = -1.6 * 600/pt = $-960

Target 1 Reward: 31.90 - 30.80 = 1.1 * $600/pt = $660

Target 2 Reward: 31.90 - 30.00 = 1.9 * $600/pt = $1,140