Wednesday, February 11, 2009

Trade Opportunity at Key Support

Hey there guys,
Hope you had a good day trading today. There were several really nice trade opportunities today. I'll point out just one. 819-820 was (and is) a really key support level. Initiated buying took off from there last Tuesday and the market shot all the way up to the 849.50 area. This support was tested two days later on Thursday and held and it was yesterday's low. So, it shouldn't be a big surprise that it was tested and held once again - especially on a Neutral/rotational day.

I won't go into all the clues that the market internals were giving that a rotation up was more likely than a big push down and thru this level. But they were clearly there. We'll talk more on this theme on a different post.

I was so delighted that (at least) one of my readers took this trade and made 10 points. Have a great day trading tomorrow.



  1. Hi MGTrader: Thanks for your great blog, I am wanting to learn Market Delta and your charts and comments are great. My question references your right hand chart, where you point to the first Exhaustion Selling at 14:16. You are pointing to a large increase in sell volume (traders hitting the bid) - and isn't this the same thing you are likely to see as a market is getting ready to breakout? So is it only after that bar when there is no follow through that you would see it as exhaustion selling? And expecially when the 2nd low hit 2 bars later with less aggressive selling into the low that you could see it as exhaustion selling? Am I understanding that correctly? Again, thanks for your comments, I look forward to you charts and comments and look for them frequently!

  2. great blog MG, I've been following it since mid Jan/09 when i found the link at MD..
    My weakness is breakouts at key resistance.

    today thru. feb 12th btw 14:30 & 14:42 CST i got turned around on the 4 pushed up on diminishing volume at the 823.75 to 825.00 zone of resistance.

    could yu at some point discuss area like this and comment on how yu look for continuation/breakout mode. what yu look at as key info on how to determine when to fade resistance or buy breakouts or just hold runners from below the mkt? this has me spun out. i sometimes think i resemble a deer in the headlights syndrome!!! any commets would be appreciated, Thx JT

  3. Dear Mead,
    You are totally correct. I waited for confirmation that this was indeed exhaustion selling which I confirmed several bars later.

    When you see large selling (or buying) volume and the market is not able to push down strongly, there is something going on. I love to see big volume and no continuation at a key level. I look for this on both the reversal and range charts. You need to know what levels are high numbers (compared to the norm) so keep track of that. In this case, the 1.25 range chart had over -5000 delta which was pretty extreme. When the market made a lower low, three bars later the delta was about -2000 and the bar closed on it's high. At about the same time the reversal chart (set to >20 contracts)show almost no big sellers after a 2 tick of the 14:18 bar low and a dead stop at a key support area. I love when support stops the market like this dead in its tracks.

    Hope it helps,


  4. Dear TT,
    Glad to give my two cents on this. I rarely take a breakout. Instead, if a market breaks out above a key level, and I am sure that it is more than excursion into taking out stops, I wait for a retracement to this level as resistance is now support. I have gotten burned so many times on breakout trades. Playing it this way, I can have more certainty. Course you miss some this way. But I am far more comfortable trading this way. If I miss the opportunity, I look for chances to enter at a higher level on a retrace.

    As for taking a reversal at a key level, unless the market is screaming Trend Day, I will look for signs of weakness (volume, internals etc)and take my chances. If I have multiple levels of confluence in the same price area, I have more confidence. Then there is the delta. Either I jump right in on a limit order (strong confluence or other reason for confidence) or (most of the time) I wait for delta confirmation on my reversal and/or range charts. Since my trades are usually a key volume levels, rarely do I just get blown thru.

    As for runners, if you have enough runners, it is usually best to spend some at these key levels unless the market is really screaming. There is an art to taking off runners. The short answer is to take them off as you hit key levels and try to hold on to one (some) for a bigger ride.

    There is no perfect strategy on this kind of thing. One needs to develop a feel. And hope for the best. You just have to get your head around the fact that you never know for sure what the market will do.

    Hope this helps.