Home—Online trading—Spread betting explained—Spread betting blog—The Dow hits my 12,500 target
Jul 25, 2012, 03:04
Posted byJohn C Burford
Comments (15)
Yesterday, I wrote a ‘bonus’ article on the Dow. It was offering such great examples of how I use my methods to forecast and trade, I thought it would be a great help for you.
And this morning, the Dow’s offering fresh lessons – especially in tramline trading.
In yesterday’s article, I showed the short-term chart of last week’s rally:
(Click on the chart for a larger version)
The form of the rally is a classic – and was suitably tradable. The A-B-C form, combined with the Fibonacci retrace at the C wave top and the negative momentum divergence made this a terrific entry point for a low-risk trade.
Now, where is the market this morning? Here’s the chart:
This is the 15-minute chart, and we can see that the market made a valiant attempt to rally above the C wave high. Remember, I was alert to this possibility yesterday.
But the hopes of the bulls for a big rally on the back of another QE announcement from Bernanke yesterday afternoon were dashed – and the market fell back.
It broke the support line shown (upwards sloping black line) and another short entry was indicated at the pink bar.
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And did you note that the low yesterday was only a few pips from my long-standing target of 12,500? I call that a hit.
But how does all this action fit into the longer-term picture?
Here is the hourly chart showing my major tramlines:
Yes, the drop to 12,500 took the market right to my long-standing lower tramline. That’s pretty.
And the tramline did what tramlines do – it provided support. So the market bounced late yesterday, and this morning is hovering just above the line.
To give me a clue, take a look at the Elliott waves on the big move down from last Thursday’s high:
I can count a clear five waves – with wave 3 ‘long and strong’ and a potential positive momentum divergence at wave 5.
And we have the ongoing support from the lower tramline at wave 5.
Putting all this together, I am making a strong case to suggest a rally is on the cards as I write.
That is why short-term traders will be looking to take short-term profits here.
Long-term position traders will be holding – they have been short from near the 12,900 area – but looking at the wave 4 high as a danger zone! If the market can rally above that (the 12,750 area), the odds would change.
But if the market rallies from here in a nice A-B-C with the C wave topping out in the region of wave 4 – a normal retracement pattern – another shorting opportunity would be presented.
Of course, with the market in a bear trend on the daily chart, I expect a break of the lower tramline at some stage – but that will probably be delayed now.
I say that because the sentiment – mentioned in yesterday’s email – is still very negative (see the latest AAII survey results). Perhaps there needs to be another short squeeze as did occur last week.
How’s your trading coming along? Let me know below.
• If you’re a new reader, or need a reminder about some of the methods I refer to in my trades, then do have a look at my introductory videos:
• The essentials of tramline trading • Advanced tramline trading • An introduction to Elliott wave theory • Advanced trading with Elliott waves • Trading with Fibonacci levels • Trading with 'momentum' • Putting it all together
• Don't miss my next trading insight. To receive all my spread betting blog posts by email, as soon as I've written them, just sign up here .
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(25 July 2012, 04:05PM) Complain about this comment
Great set up. I love your tramlines. Put on Demo Trade and Took Profit 16:00hrs after reading email, as never reached my T/P level.
(25 July 2012, 04:13PM) Complain about this comment
Hi John,I'm quite impressed with your methodology. Is there any chance you would consider doing a trade alert or trade recommendation service in a much more timely manner? By the time I receive this email, markets have often moved away from the best entry/exit levels. Kind regards,Niru Devani ndevani@btopenworld.com
(25 July 2012, 04:20PM) Complain about this comment
Hello,A trader with a target should wait to see if the target is reached and not close out too quicly (let your profits run!). When (and if!) it is hit they should close half or 2/3 and let the rest run. By moving the stop-loss they can make sure they lock in some profits. Yesterday the DOW dropped very briefly to 12516 and then rallied back up to 12550. To me that is not a trade that reached its target. Anyone with a trailing stop in place would have been taken out this morning during the rally back up to 12720 area for a small profit. Do this too often and you'll notice your winners will be smaller than your losers and you risk being down overall.I have been learning to trade for 3 years now. Still haven't made a profit - mainly for this exact reason!
(25 July 2012, 05:17PM) Complain about this comment
2. Niru DevaniThanks for the feedback, Niru. It’s interesting that several readers have inquired about such a service and it is something we would consider if there is enough interest. There’s nothing imminent. But we are working with John on how we could do this. Keep reading MoneyWeek Trader. If it happens, you'll learn about it there.Frank Hemsley - MoneyWeek
(25 July 2012, 05:32PM) Complain about this comment
My connectionin is too slow to hear your videos.dvd?.Any live lectures? Who do you use for Spread betting?Brilliant E mails
(25 July 2012, 05:48PM) Complain about this comment
Thank you for your tutorials and newsletters. I've subscribed to two phone alert trading "systems" and none have been anywhere near as reliably right as your simple tramlines and fib approach, especially where the Dow is concerned.I worry that if you extended the service as is being suggested it would destroy the essence of the service. I'd like to see it continue just as it is.
(25 July 2012, 07:46PM) Complain about this comment
2.Niru Devani 4. Frank HemsleyAm I right in saying that a "tipping" service is being considered where John will advise whether to go long or short etc etc. I thought the point of John was to advise and help people how to become good traders themselves and to form their own opinion. For me, allthough I use "tramlines" I have other methods of turning a decent buck rather than using Elliot waves and Fibs and I get a great deal of enjoyment doing so and listening to what John and others have to say. But if John is going to advise on when to buy and sell, sorry, I would rather sink or swim by my own hand.
(25 July 2012, 07:57PM) Complain about this comment
I wholeheartedly agree with Bronco Bill for the reasons he gives but also not least because anyone in such a trade is likely to diverge from the intended path (implied by John's approach) eg by getting out too soon & not compensating for the stop loss exits (a misnomer because they don't stop losses merely limit them).Some of these trades can look brilliant with hindsight, allowing one to make the assumption you'd have got in & out at the right points. 't ain't that easy in my experience!
(25 July 2012, 08:15PM) Complain about this comment
Firstly thanks to John for his professional blog; keep them coming John.I agree with the people who believe in making your own calls. Using John's techniques I have managed to take over £1,200 in the past 2 days using his Tramlines for very short term trading.I like to see myself as a medium term swing trader but in reality I am a short term scalper, however I am using the techniques John uses and trade between short term tramlines for my buy and sell triggers. Any alert service would interfere with my process. I am working on making some longer trades using longer term tramlines, but in the meantime I will continue scalping as it works for me; using John's valuable lessons that is. Thanks so much John.
(25 July 2012, 08:58PM) Complain about this comment
I would like to use John's approach. Like Chris I tend to take the first leg of any move (eg 50-100 points) rather than try to see out the whole of a 400 point move say.It's good to hear from Chris he is able to use John's technique successfully in such a way.
(26 July 2012, 08:37AM) Complain about this comment
Tipping service! Learn to do it yourself.........You peeps need to remember something. You can teach everyone the technicals to trade inside a week but yet 90% still lose.....Why? because successful trading is 10% technical and 90% psychological. The biggest barrier to success is You!
(26 July 2012, 09:50AM) Complain about this comment
2. Paul, 7. Bronco, 8.mr, 9. ChrisThere are no plans to change MoneyWeek Trader. MoneyWeek Trader is educational. It is not intended as trading advice. What it shows is how John's methods can help him pick turning points and exit points. He uses them successfully. Hopefully, by learning how to use them, readers are having some success too - or will in time. From comments on this thread, it's great to hear that that is already happening for some readers. (Let us know if you are having some success and how John is helping you.)To re-cap, in John's MoneyWeek Trader emails he is showing how anyone can use his methods to be successful in trading. John extends that education via the MoneyWeek Trader small group workshops. Any 'alerts' service would be separate from this and is only in idea form at the moment. But we do know from previous comments and emails that there is interest in the concept. We'll let you know if it develops. Frank Hemsley – MoneyWeek
(26 July 2012, 11:34AM) Complain about this comment
The way I look at trading is like a motorcycle journey. Yes I want to get to the destination safe and sound, in this case with a profit, but the best part for me is the trip itself. A new challenge every day, meeting different people on the way and sharing experiences. Yes s--t happens sometimes but thats part of the fun, the enjoyment. If anybody wants to go straight there shut up in a tin box missing much on the way then the "tipping" sevice is for them. But be warned, this does not guarantee you will arrive safely.
(26 July 2012, 12:16PM) Complain about this comment
Wow, big short squeeze.....200 point move in 10 minutes moving marginally above 61% retr.The current pattern is ripe to be broken. Trading Central say it's going to the top. A very interesting week ahead.I hope you shorts got out safely!
(26 July 2012, 01:29PM) Complain about this comment
Thanks John for the great service. I guess it does make a bit of a mockery of the technical analysis when, at any time, a central banker can come out with some strong (even if ultimately empty) words that move the SPX 20 points in about an hour, or the Dax 200 points, thus breaking the pattern and forcing a retreat. My hunch is markets could rally till the Fed and ECB mid-next week (SPX to 1385 or even 1400, DAX to 6850). By then there will be little upside potential left, but huge scope for disappointment. Scene could be set for a bloodbath. I'm waiting.
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The trades on this blog are all 'closed', past trades. These aren't trades for you to copy, they are there to teach you some useful trading tactics for your own spread betting. And always remember: spread betting carries a high risk to your capital as you can lose more than your original stake.
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