The Pattern Trapper Blog

I received a few e-mails asking me to critique what had gone "wrong" with the directional implication of Friday's March Silver Market Report, so I thought I would write a few short paragraphs about market expectations and developing a trading plan based on those expectations, using Friday's Report as an example. The trading concepts discussed below are a critical component of the Pattern Trapper On-Line Course. Please review the course description area for more detail. Click Here!

In a nutshell, experienced traders approach market expectations not in terms of being "right" or "wrong", but, rather, as a way of understanding where the odds lie, and developing a trading plan based on those odds. In regards to Friday's Report, Pattern Signal firings told us that the odds favored higher prices in March Silver. We were never triggered into that long because the prior day 34.490 level mentioned in that report was never breached. Instead, we had a test and failure of that level, which suggested that the odds were shifting to the downside. Price hovered around the 34.177 Daily Pivot for a while, but then broke down in quick fashion, telling us to get on the short side.

No one is going to be able to offer you a crystal ball for your trading. The best that a trader can do is to educate yourself so that you know how to interpret where the odds lie, and then develop a trading plan based on those odds, and also a contingency plan in case those odds don't play out as expected. Pattern Signal firings have some very high odds for follow-through. But when those odds don't develop as expected, the market is often telling us that it is about to do the opposite. Traders need to understand that, stay flexible, and LISTEN to what the market is trying to tell you.

Often, when Pattern Signal firings demonstrate high odds for a particular directional move, the market's inability to follow-through on that move by breaking a significant level of support or resistance is signaling that it is setting up to do the exact opposite. (i.e., in the case of Silver our significance level of resistance was that along the 34.490 level of the prior day high, which again, was never breached).

Please refer to the chart below for a review of the way the day developed, and how our expectations changed based on what the market was telling us. Again, for further details on how to develop such an approach to trading, please refer to the Pattern Trapper On-Line Course. Mention this post when ordering by phone and get a 20% discount.

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The March Silver contract has fired 2 Day ROC Buy, 90-10 High Continuation, and Low Breakout Continuation Setup signals for today's trading. The 2 Day ROC Buy signal implies that today's principal trade direction should be to the upside. The 90-10 High Continuation signal is fired when the day's trading closes within the top 10% of the day's range. It tells us that yesterday's late day move higher is likely to continue on into today. The Low Breakout Continuation Setup signal implies significant downside IF yesterday's low happens to be taken out. Cycle Indicators (chart at right) are mixed, but the more immediate trend is to higher prices. Odds favor continued upside, but the Low Breakout Continuation Setup signal tells us that we'd want to be on board any downmove. Trade the break of yesterday's 34.490 high to 33.610 low range with a stop and reverse on the opposite side as the entry. Price action relative to today's 34.177 Daily Pivot level may provide clues for earlier entry.

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The March Coffee contract has fired Wide Range Upside Reversal, 90-10 High Continuation, and Momentum Pinball Sell signals for today's trading. The Wide Range Upside Reversal signal tells us that yesterday's action likely marked a significant intermediate term turning point with more upside to follow. The 90-10 High Continuation signal tells us that the day's late day move higher is likely to continue on into today. The Momentum Pinball Sell signal suggests that IF the first hour's low happens to be broken, the market is telling us something completely different than originally assessed, and we'd want to consider a short position. Cycle Indicators (chart at right) appear as if a short term cyclical low has just been marked. Odds favor further upside in today's early trading. Buy the break of yesterday's 155.35 high with a stop just under the 152.43 level of today's Daily Pivot. Price strength above the DP may provide clues for earlier entry. The Momentum Pinball Sell signal, on the other hand, suggests we consider the short side if the first hour's low happens to be broken to the downside.

Forward this to friends and colleagues!     Disclaimer: trading involves significant risk and is not suitable for everyone.

The March Wheat contract has fired 90-10 High Continuation & Reversal, Low Breakout Continuation Setup, and Momentum Pinball Sell signals for today's trading. The 90-10 High Continuation & Reversal signal is telling us to look for morning follow through on the strong close, but to expect a likely reversal once the initial move has topped. The Low Breakout Continuation Setup signal implies significant downside IF yesterday's low happens to be taken out. The Momentum Pinball Sell signal suggests that IF the first hour's low in today's trading is broken, the market is telling us something completely different than originally assessed, and we'd want to consider a short position. Cycle Indicators (chart at right) are moving into a region where short term cyclical tops often form. Odds favor continued upside in today's early trading. Buy the break of yesterday's 889^0 high, or even earlier if price can demonstrate strength above 880^4 level of the Daily Pivot. But stand prepared to exit or even reverse if we get appropriate price reversal patterns and/or Oscillator Divergence near important resistance levels. Our Normal High Range Projection level of 901^2 or the Extended High Range Projection level of 910^6 would be likely areas for such a reversal to take place, as would a test and failure of yesterday's high.

Forward this to friends and colleagues!     Disclaimer: trading involves significant risk and is not suitable for everyone.

The December S&P contract has fired 90-10 High Continuation and Momentum Pinball Sell signals for today's trading. The 90-10 High Continuation signal is fired when the day's trading closes within the top 10% of the day's range. It tells us that Friday's late day move higher is likely to continue on into today. The Momentum Pinball Sell signal suggests that IF the first hour's low happens to be broken, the market is telling us something completely different than originally assessed, and we'd want to consider a short position. Cycle Indicators (chart at right) appear as if a short term cyclical low has recently been marked, but the larger trend is to lower prices. Odds favor further upside in early morning trade. Buy the break of Friday's 1360.50 high with a stop just below the 1353.50 level of the Daily Pivot. Price strength above the Daily Pivot may provide clues for earlier entry. The Momentum Pinball Sell signal, on the other hand, suggests we consider the short side if the first hour's low happens to be broken to the downside.

Forward this to friends and colleagues!     Disclaimer: trading involves significant risk and is not suitable for everyone.