There were some interesting charts today with good examples of indicators and patterns I use. Let’s take a look at them

Sugar futures have been in a down trend for the past weeks.MACD had a bearish crossover on 3/26; a little late for that swing down, but it did give a directional bias for trading. It had a good rally from the low on March 30th, coming up to the 50% retracement level of the sell off yesterday. Today was a momentum sell short day; let’s go through that.

The bottom panel of the chart is two period momentum, the indicator I refer to when I say “momentum” sell short day.  Momentum is the close minus the close from X days ago-for this method, I use two period momentum.  What we look for are extremes in momentum; points at which momentum is likely to switch direction.  As momentum leads price, a change in the direction of momentum is likely to mean a change in the direction of price.

I drew an arrow at momentum as it rose to its highest level in nearly two weeks. The momentum high combined with the Fibonacci retracement resistance gave a good short sale opportunity today; by the close of the session it had nearly reached the price objective of the last swing low of 1244.

Momentum led the selloff

Momentum led the selloff

May Cotton had a big rally early this week, then spent the past two days consolidating. The past two days highs were around 4674, which was a 50% retracement of the decline from Jan. 27 to the march 9 low.The past two days showed a range contraction from Tuesday’s big rally, and the two dojis were an additional indication of indecision. These two patterns indicated that a breakout, directional move was likely today, and the Fibonacci resistance at 4674 gave a chart point to watch as a potential takeoff point for a breakout move.

Two Dojis were the Breakout Signal

Two Dojis were the Breakout Signal

Looking at an intraday chart, note how the Fib level (the green line, 4674) served as resistance early in the session. If you bought at the first move over that level, a logical stop would have been just below the previous swing low (the green arrow).If you waited for the second pass through (if your entry price was higher) you could have used the thrid swing low at 4629 for a stop.After this second pass through cotton really took off for a good quick trade for the ned of the week.

For more information about Swing Trader’s Insight go HERE.

A good way to end the week!

A good way to end the week! Futures Chart Lessons

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