YMH2, (3, -1) formula, Stretch profits, 27 January 2012

Hi,
Bright, brief and ....
Fading unchanged - Stretch produced a profit that surrendered bullish conviction for the reasons below.

12684 + 38 = 12722 (12720 = high to measure the short fade to lower prices) targets the potential (-1) of (3, -1).

Measuring the (3) or (3, -1) as prices failed through the PIVOT POINT (12703), .... begins the (3) of the (3, -1) formula:

PIVOT POINT - 38 - 38 - 38 = 12589

12703 -Stretch -Stretch -Stretch =12589 (12576 = low 27 January 2012)

The (3, -1) formula strategy was achieved.

The actual price action analysis identified the price rotation reversal from fading from below unchanged to fading unchanged as prices reversed rotation and failed the PIVOT POINT, 12703.

The first fade, unchanged less the Stretch projected a trade entry two points below the mid-A session reversal low, 12648. Close enough to execute the long, i.e., fade at unchanged less the Stretch strategy, i.e., (-1) of (3, -1).

12684 - Stretch = 12684 - 38 = 12646, ... 12648 = low, fade the first Stretch move away from unchanged: executed.

12648 + 38 = 12686 + 38 = 12724 (12720 = HIGH printed in two consecutive minutes and 12703 = PIVOT POINT).

26 January trading range, 12786 - 12639 = 147 points. 147 points x 0.618% = 90. 12639 + 90 = 12729= RESISTANCE

50% = RESISTANCE, i.e., 50% of the 26 January trading range was 12713.

Once, twice and .... you know what they say about resistance, the third time is a charm. If you were intra-day trading the March $5 Dow (YMH2) futures, prices failed to continue trading above the PIVOT POINT, 12703, after failing to trade higher than the above price points.

Therefore a small profit (about 30 points of profit, i.e., $150 which is +30% basis $500 intra-day margin) was built into the long as prices started to fail the PIVOT POINT (12703 - 38 points = 12665 with ten points to think about your navel before prices made a new low at 12647.

So far it's simple math in real time. RIGHT!?! Let's say you figured this out as it was happening. You faded the level at unchanged less the Stretch, 12684 - 38 = 12646. And you were long in the mid-12650s after the third higher low started lifting prices higher. But then you noticed that the profits were starting to grow backwards,...

After prices failed to print above that 0.618% bounce into the 26 January range, 147 x 0.618% = 90 points + 12639 = 12729,
Never printed at (unchanged + Stretch) = 12722,
Failed to continue trading above the PIVOT POINT, 12703
And ultimately failed unchanged looking for value at lower prices.

THE FIRST TRADE HAD A PROFIT BUILT INTO IT.
THE SECOND TRADE HAD A PROFIT BUILT INTO IT

The fade above unchanged was looking like a smarter short than the long fade below unchanged, e.g., because long profits were shrinking below the PIVOT POINT; and beginning to confirm the prior day's bearish Gravestone candlestick at a benchmark high.

Offsetting the long fade for the reasons above executed the rational that prices were destined to trade lower.

12684 + 38 = 12722 (12720 = high to measure the short fade to lower prices) targets the potential (-1) of (3, -1); ...... or, .....

Measuring the (3) or (3, -1) as prices failed through the PIVOT POINT (12703), .... begins the (3) of the (3, -1) formula:

PIVOT POINT - 38 - 38 - 38 = 12589
12703 - Stretch - Stretch - Stretch = 12589 (12576 = low 27 January 2012)

FYI: Unchanged - Stretch - Stretch - Stretch = 12684 - 38 - 38 - 38 = 12570 (12576 = low 27 January)

[NOTE: The Delta Phenomenon, published by the Delta Society which claims it has 210+ years to back up their data, allows for a new cycle to start with a "1" but is reversed at "1A" which is the only allowed alternate count in their cycle count. Based on their data, the equity index futures are usually late by a day or two, which produces a better than 72% probability that the 26 January Gravestone candlestick on the daily chart was THE benchmark high, at least for the next four to six days.]