Enthios Trade Blog

ES 2006 Archive
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Because markets are reaching new highs, watch long opportunities
using the short term stochastic turns.

Note gap down from Friday close

Note prices will open just above the 1348 VPC so there is no trade there.
We might possibly look at a long trade off of 1348 depending upon the size
of the gap.

Market closed on POC so this will be neutral unless prices move away
during the overnight session. We will comment further in the morning.

Note prices opening at VPC which is therefore invalidated.

Note revised NTR for today with correct upper VPC.

The Natural Trading Range for Tuesday includes a VPC from almost one year ago. Typically the strength of a market profile is diminished over time, as the market's "memory" decreases. Bear this in mind while making trades.

The Natural Trading Range for Monday is the same as Friday because the market opened right on Friday's POC. Look for a move to either 1283 or 1252, then a retrace back from that point.

This shows the Virgin POC ("VPC") tool on Ensign, which Howard created specifically for us.

Those of you who have read my book, "New Frontiers in Fibonacci Trading," will know that the optimum exit on any reversal is the third wave as measured by the Fibonacci ratios of 1.382 and 1.618. Those are shown here.

exit 1/2 @ keltner

Long @ VPC

Long approaching but watch stochastics

NTR for Monday. Note we have differing time-based (yellow) and volume-based POC's.

The "Enthios Cross" is a simple method for trading trend days like today. You can use the Universal Chart as a filter for long and short trades. It uses a simple 5/15 moving average.

Market gapped above the previous high point of control, so the Natural Trading Range for Friday will be upside only.

Note 1318.75 is not an official VPC because prices touched it yesterday; however, the market did not trade through this price level so it can still be used for a short trade.

NTR for Wednesday

Reminder short approaching

Short signal approaching at yesterday's point of control:
lS

Natural Trading Range for Tuesday, May 2

New Template (beta only)
UNI-060501.dat

Stopped

Short @ vpc

Note the ES and ER are in opposition this morning; that is, ES is near a VPC high looking for a short, and ER is near a VPC low, looking for a long.

NTR for Friday. Note we will not be in the trading room today.

cover remainder @ stochastic reversal

cover 1/2 @ keltner, +3

short @ vpc

short approaching at next vpc

cover remainder @ oscillator

cover 1/2 @ keltner

short at vpc

Short approaching at 1312.75. Ignore the 1306.75 poc because prices moved too far past it and too close to the 1312.75 line

Natural Trading Range for Thursday: prices gapped down below the NTR so 1303.75 become the up-side of the range. 1295.5 is a poc made up of 4 days of activity from April 10~14. It is not a real vpc, but can be a substantial support area.

Long signal approaching at VPC

Natural Trading Range for Monday

This is a good time to remind you about the importance of stops. We use an optimized stop based on past history. You can optimize your own stops simply by keeping a record of the high and low points of each trade, then running a simple spreadsheet "if" scenario (or use the Solver plug-in) to tell you where the most profitable exits are, both for stops and for profit-taking. Some people prefer to use market-based stops such as previous lows, or other support/resistance points. These may work too, but make sure that you have tested the efficacy of these before you employ them as your chosen stop method. As a rule of thumb, you should consider a test size of at least 50 trades, and preferably over 100, before using a particular stop method.

Note the previously indicated long was not triggered because the oscillators signaled long outside of the value area (VA) of the POC.

Exited at break-even because technically this trade should not have occurred since the original long signal triggered during the overnight session (before 8:30am Eastern).

This illustrates a 1-2-3 entry, which is the higher low of a reversal. This is the same as a seed wave. Stop can be the higher low itself (here, 1304.5)

Any break of 1311.50, whether it occurs after a retrace to the POC or before, will have 1314.75~1316.75 as a target. This is calculated using the Fibonacci ratio against the size of the first wave in the reversal, as shown here:

The market closed right on the POC so look to see which side of 1308.75 it opens tomorrow morning.

This just shows the anatomy of a seed wave. The "seed" is just the first upward wave after a series of downward waves (or vice-versa). Measure the size of that seed wave to estimate the target of the next wave (labeled here as "3"). This is usually a Fibonacci multiple of 1.382~1.618. Likewise, IF (and only if) prices continue on up, you can estimate the target for a potential Wave 5 as 2.236x the size of the original seed wave. Wave 5 tends to be complicated and made up of a number of smaller waves.

Prices are opening above the highest virgin POC, so there is no up-side limit. However, this chart shows the Fibonacci W3 target zone of 1299~1301 so look for a reversal in this area, as the upward trend will naturally exhaust itself here.

This is less a "rule" than it is just common sense. Once the trade has gone substantially all the way towards the first exit target at the Keltner band, and then moved against you, the trade has essentially failed, and it is best to exit at break-even. A good rule of thumb is +2~2.5

As you can see from the chart below, the market reversed at yesterday's POC. Unfortunately the stochastic (and other oscillators as well) indicated that the market was oversold, and this in turn did not give us the statistical confidence to take a short trade. The advantage of oscillators such as stochastic is that they help confirm other signals. The disadvantage is that when the market moves against their indications, we grow frustrated. The key is to build a trading system around the combination, with optimized target exits and stops, so that we can minimize losses while maximizing profit. This can only be achieved by applying objective methods. Subjective decisions can only be "shown" in hindsight, and are not useful for illustrating. Indeed, they can be even more frustrating to the novice trader.