Last night hit 4130 but there was no follow through in US markets to have the SPI open lower.
Based on Today's trading random resistance @ 4128, but I'm not expecting the SPI to move below 4103.
Potential move up towards 4150"
SPI Weekly and 5-day pattern
Early selling pressure down into my spiral filter support @ 4103 and the SPI continues to follow the 5-day pattern higher.
As per Weekly report…
July high @ 4120 reversal pattern was based on Monday’s high @ 4130 and Tuesday’s open.
The past 3 months has seen the same reversal pattern from a higher Weekly open back towards the Weekly 50% level.
However, we are in a new Quarter and a ‘thrust’ trending pattern is occurring.
Once Tuesday failed to open below the 5-day 50% level, market dynamics has pushed the SPI up towards Tuesday’s highs @ 4150.
The Reversal down from these Monthly highs was based on Monday remaining below 4130,which it did, but Tuesday failed to open lower.
Monday’s expected resistance and ‘sell’ zone was open to RISK because of the shift in the 5-day pattern and a Thrust pattern occurring along with price now trading above the Monthly highs.
Anyone shorting around July's highs based on Tuesday’s trading has got to begin to feel that the trade is moving away from them, and following the 3rd quarter pattern UP towards August highs.
Anyone holding ‘long’ positions on stocks can sit back and trade the trend towards 4400….
However, around August highs will complete a 2-month wave pattern upwards, which is an ideal area to partial exit some positions and leave open others, which is what I’m doing.
In Conclusion:-
The Dilernia Model and Methodology is a
discretionary model & methodology, and traders have to think
for themselves.
Most traders who don’t want to think for themselves develop
hardcoded systems with positive expectancy, which is a correct thing to
do. The system then has an edge, defines Risk/Reward based on
historical evidence, and hopefully makes the trader money and not
lose money.
However, hardcoded systems often fail and move into draw-downs
periods. Most hardcoded systems don’t know when those draw-down
periods will occur or how long they will last for.
Using my model can often help traders who use hardcoded
systems, because it helps optimize the systems as it clearly
establishes trends, the direction of trends, and likely areas of reversal
of trends within multi-timeframes.
My model doesn't use ‘hardcoded expectancy’ , but employs statistical expectancy using hardcoded levels with a random outcome.
We have just seen the previous 3 months have precise tops in the
market, from a precise low in March.
For example:- having an expectancy that around the March lows and
‘support’ might provide a potential 30% UP swing in the 2nd Quarter: - random outcome until complete.
Or a 3rd Quarter Thrust pattern once lesser timeframes confirmed the
UP move.
Example:- why short a rising stock in Australia if the S&P has closed
above the 5-day highs? There is a high probability pattern that the next
day will gap up.
Not every trade will be a winner, and not every higher timeframe support
or resistance will hold, they often break, but it’s the filtering of those
higher timeframes using lesser timeframes that the trader uses:-
5-day patterns or Weekly ‘open’ patterns:- support/resistance
I’m not the one who coined the term the ‘adaptive trader’, but that’s
what the trader has to be, ‘adaptive’ and be aware on what’s going on in
the higher timeframes.
I’m completely bias, but that’s what my model and
methodology provides.What makes a good methodology is one that gives
an individual trader a good grasp and understanding of what the risk
and rewards are along with providing high probability set-ups with
the lowest ‘risk’. Another trader looking at the same model and
methodology should have the exact same understanding.
It’s there for all to see. It’s objective. There are rules and principles
to formulate your own trading strategy based on your own limitations or
the timeframe you choose to trade.
It doesn’t mean all traders will end up with the same results, because it
is still a discretionary ‘method’.
SPI Weekly and 5-day pattern (Above)
I pointed out the July highs, and if anyone who is shorting around these
highs there are certain patterns to focus on….
Short resistance:- 5-day highs 4130 along with a higher Weekly open
The reversal pattern won’t be confirmed until price is below the 5-day
50% level.
A higher probability pattern would reverse down from these highs and
gap lower below the 5-day 50% level and continue down. However
Monday hit 4130 (sycom) but didn’t gap open below Tuesday’s 50% level.
Tuesday’ hasn’t opened below the 5-day 50% level, but price
is still coming down from the 5-day highs. Therefore the trader is still in
a winning position but he or she needs to be adaptive, because
July’s resistance levels won’t last long, and with a couple of days to go
until July’s resistance level shift, short trading around 4130 in August ends
up being higher risk than in July.
Even though one trader might still think the market is heading down into the weekly 50% level, that same person needs to optimize the market
based on Market dynamics.
Another trader might want to trade shorts at 4130, but add more once below 5-day 50% level.
Another trader might short around 4130 but use a partial exit strategy
21 points down from the high and focus on the R42-44 range and exit:- day trading
Both the Day trader and Swing ‘short’ trader are trading the same
patterns, but managing the trade differently. That's what makes a good methodology, they understand the pattern and trade accordingly.
Short trading around 4130 was valid for Monday, but now there is a shift
in market dynamics that could see the SPI move towards 4150 on Tuesday.
So why would the trader short on Tuesday then?
Because there is another high probability intra-day pattern:- spiral point and a 5-day filter that has a pattern of moving away 21-42 points @ 4129
Both traders trade accordingly.
Therefore short trading 4130 had more probability of reversing down on Monday than what Tuesday has, because of the change in market dynamics but doesn't mean traders can't short trade a spiral 'top' pattern.
A trader ‘short’ trading around these highs today understands that there is a larger Primary cycle that’s trying to move towards 4400,
therefore the best they can hope for is a move down into the Weekly
50% level and then adapt to the price action around that level.
Exit and then re-enter using the 5-day patterns once again if the Weekly
50% level holds or fails.
A stock trader trading the 3rd Quarter 'Thrust' pattern can sit back and ride a 2-month wave pattern upwards with a primary target of 4400,
which may or may not get there:- random pattern.
It’s all about support, resistance, trends using hardcoded or
statistical expectancy and optimization based on market dynamics and
price patterns.
- Daily Trading Set-ups & Analysis
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