Finding Good Vibrations can Lead to Great Profits (Part 3)
05/21/2008 12:00 am EST
Continuing our discussion of median lines, as you can see in the chart below the price climbed higher and tested the red up sloping reverse median line before turning lower. There are also several nice touches at the blue up sloping median line, as well as a test of the blue lower median line parallel. Both of these sets of lines are vibrating with price and doing a great job showing where price should run out of up side directional energy and where price should run out of down side directional energy.
When price tests both the blue and red up sloping lower median line parallel and then closes well back above both lines, I am ready to place my orders. I want to get long e-mini S&P 500 futures near or at the energy point, at either of the lower median line parallels-price will intersect with either of them at 1373. My initial stop loss order on this trade will be below the swing low at 1371, as well as below the spike low that tested the blue lower median line parallel. And my profit target will be at the energy point to the up side and the upper median line parallel, at 1395. This gives this potential trade a risk reward ratio of 8:1.
More tomorrow in part 4.