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Mentor Mike’s Daily Turning Points for Thursday, 6/23/11

Mentor Mike’s Daily Turning Points for Thursday, 6/23/11
 

 

You don’t need to master complex cycle theories or pay to join some elite trading group in order to recognize and utilize daily turning points. I can teach you how to spot them and exploit them with conventional technical analysis.

Scoreboard

EUR/USD: 4 wins / 0 losses; ES: 5 wins / 0 losses

 

Chart Chat

Today both markets had well-formed LO-HI-LO configurations with the turning points all fairly close to their projected times.  While installing my new computer, I decided I needed to upgrade my Microsoft Office and Intuit Quickbooks software.  Did you know that many software manufacturers and dealers give substantial discounts to students, teachers and school staff?  I’m talking half price for the deluxe version.  Anyway, I took advantage of my wife’s employment with the local school district and saved some big bucks.  Next time you need to upgrade, find someone who qualifies for the discount.  Have a great evening.  Be back tomorrow.

 

My Technical Toolbox

The upper chart panel contains Japanese Candlesticks, Simple Moving Averages, the Parabolic SAR and Donchian Channel. The lower panel contains the MACD (both lines and histogram), and Slow Stochastics. Every parameter of every indicator is a Fibonacci number. Sometimes I use a drawing tool known as the Linear Regression Channel to help me determine when one swing has ended and the next has begun.

My Money Management Plan

My money management is all about the old trader’s saying, “Let profits run, cut losses short.” I use a 2-target or 3-target “peeling off” or “scaling out” strategy. My first target is the value of a 34-bar Average True Range on the 5-minute chart rounded down to the nearest Fibonacci number of pips/ticks. The second and third targets are additional numbers in the Fibonacci sequence, but not necessarily sequential, e.g., 5/13 ticks (two targets) or 5/13/34 ticks (three targets). After the first target is hit, my Ninja Trader 7 platform adjusts my stop automatically to the number of remaining contracts and moves it to a position that protects a minimal profit. Thereafter, I trail the stop manually by keeping it even with the Parabolic SAR.

How to Read the Chart Notations

Trades are marked with arrows that begin at my entry point and end with the arrowhead even with my exit point. Arrow above candles = short trade. Arrow below candles = long trade. Green arrow = winning trade. Dark Red arrow = losing trade. Yellow arrow = a good trade that I was unable to take for some reason.

Regarding the vertical dashed lines in the upper chart panel, the GOLD line is at 4am PST when I typically get up. The GREEN line is at 6:30am PST when the NYSE opens. Thus, the space between the gold and green lines represents my personal “premarket.” The RED line is at 1:15pm PST, the daily close for the ES. So, the space between green and red is the market’s basic “day session.”

Regarding the three thicker RED, WHITE & BLUE dashed lines in the lower panel, from left to right they are at 7am, 9:30am and 12pm. These are the approximate times when daily turning points tend to occur.

Daily Turning Points

Every freely-traded market makes between two and four alternating HI/LO turning points during its primary day session. On an average day, there are three: HI/LO/HI or LO/HI/LO. These turning points are consistent with various market cycle theories including Elliott Wave and Welles Wilder’s Delta Phenomenon. The RED, WHITE & BLUE lines on the chart remind me to be on the lookout for these points at these approximate times.

Some days, I will add my version of the Elliott Wave count to one or both charts. Since there is no objective standard in EW, there is no way to know for certain if my wave count is correct, but I do my best to abide by the conventional rules and guidelines of wave counting. You don’t need to be a master of EW, but it helps to have a general understanding of two basic EW principals: 1) the differences between a with-the-trend impulse wave and a counter-trend corrective wave. And, 2) the fractal geometry of the market; i.e., that all patterns are part of larger versions of themselves on higher time frames and made from smaller versions of themselves on lower time frames.

 

Please click on the charts below to make them larger.
Chart        #1
Chart #1

 

Chart        #2
Chart #2

 

 

 

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