I Spy a Large Trading Opportunity-How You Can Too (Part 4)

06/19/2008 12:00 am EST


Timothy Morge

President, MarketGeometry.com

This chart should clearly illustrate the concept: As the ancients said, ‘that which is below is like that which is above and that which is above is like that which is below’. The undershoot or inability of price to trade lower to its ‘next most likely line’ generally leads to overshoot of a similar size, as you can see in the chart below. This is not a well-known or popular trading measurement in the trading community, but I suggest you watch for it on your charts and you may soon be adding it to your trading tools!

Remember that I am being extremely careful about my entries because I know and admit to myself that I have an opinion and my opinions may cloud my focus and trading ability, so I want price to show me every sign that it is setting up exactly as I want before taking a position.

Price came off hard after the double tops, nearly making it to the red down sloping Median Line before turning back higher. Then price tested the Upper Sliding Parallel I had drawn in through the double tops. Note that the bar that tested the Upper Sliding Parallel closed far from its highs, in the lower third of the bar, with great down side separation from the high of the bar to the close of the bar. This is another major sign that there are sellers in this market at the higher levels. Have I seen enough quality signs of weakness to be interested in a short bond future position?

More in Part 5 tomorrow…

Tim Morge

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