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Using Technical Analysis to Conjure Up a Trade

20 Jul Posted by in Techical Analysis | Comments
Using Technical Analysis to Conjure Up a Trade
 

 

Sometimes, when I’m waiting for all the alignments I think create a perfect setup for a trade entry, I get tired of waiting. For example, the next big move, and thereby trade, I anticipate in the stock sector is on August 15th. While I’m waiting for that “ideal” setup to arrive, I’ll sometimes attempt to create a scenario where if certain criteria are met, a market entry is highlighted.

The e-mini’s rise off of the July 12th bottom, through yesterday’s (07/19) top perfectly fit my wave count of a correction wave # 2. Today’s decline, reasonably, could be considered to mark the onset of wave 3. Now lets attempt to force the issue: By running a pitchfork (care of Dr. Andrews) off of the bottom of June 4, through the swing high of July 5, and then finally locating the final point at the low July 12, you can see from the accompanying diagram how well the construction contains the trend.

Please click on the chart below to make it larger.
E-MINI S&P 500 Stock Index CMC Sep 12

Next, lets mix apples with oranges (courtesy of Mr. Gann), and run a 1×1 line (for reference purposes), and more importantly the 1×4 line off of the May 1st high. Of particular interest to me is the proximity, of the intersection of the 1×4 Gann angle, with the central median line of Andrews’ pitchfork, and how near perfectly it contained the rising market into yesterdays high.

So, should the market breakdown, below the lower median line of the pitchfork (that constitutes, what pitchfork analysis calls a “trend reversal entry”), I’ll go short. More aggressively, if the market breaks below 1339.25, I would sell. So, in a sense, the use of our technical analysis tools can sometimes artificially manufacture a trade, while waiting for one to occur naturally.
I’ll be discussing theoretical concepts integral to some of the time projections I use in a webinar next Thursday (07/26), so stay tuned.

 
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