This Week’s price action was ‘classic’ text book stuff….A break of December 50% levels, support disappears, and price heads straight down into the December support.
3-day consolidation pattern, and the break of the 3-day highs, changes the cycle and the market rotates upwards.
Even when we look at the monthly timeframes before, it all fits in nicely with Time and Price analysis using the Dilernia Model:-
October high-reversal, November 50% support-rotation, December 50% break-down, December lows support- rotation.
Next Week:- Trend will be decided by the Weekly 50% level @ 6377..
Above and price is moving back upwards to close the ‘Weekly Gap’, and then be defined by January’s 50% level.
A failure around the Weekly 50% level, will be part of the rotation back down after the change of the 3-day cycle. There is such a large gap to the 3-day lows, that I favour at least a 2-day rotation-stall before any up trend is going to occur.
But that will be determined by price trading either side of the Weekly 50% level
When we look at the trends within the Monthly timeframe, the 3-day cycles clearly define the direction of the markets, along with certain timeframe levels, that act as support and resistance.Trading is simply about support and resistance, and by looking at this chart, it all looks so damn easy. But in reality it’s not easy, especially if you are a day trader.
For example:- a swing-position trader on stocks would understand that once December 50% levels broke, Buying into the markets was open to RISK, that is until the December lows are reached. Once support is reached, it’s the most logical level to be BUYING into the market. Much more so once the 3-day highs break.
Day-trading futures is different, because there are so many factors that need to be modelled to minimise Risk. And certain factors need to align perfectly for Reward to be maximised.
For Example:- I modelled this entire walk forward scenario in last Week’s report, but Monday didn’t align for me to short the market, but I understood ‘risk’ on that day not to be doing anything once the 5-day lows broke. And every other day was the same.
Come Friday, and I had modelled for prices to move higher and break the highs, but firstly I wanted to see ‘gap closure’ @ 6202 or a 44 point reversal in the market for me to trade ‘longs’.
That 44-point reversal didn’t occur until it was above the 3-day highs, and the
44-point reversal aligned with the break. That was my first long on Friday.
44-point spiral points are important risk levels in Daily trend direction; they are extremely robust entry levels because it is closest to your ‘stop’ loss point, but on occasions they fail.
On Thursday, the entry level ‘LONGS’ was around the r87 lows @ 6182.
Once I exited the trade, I wasn’t going to enter another long until there was a 44-point reversal. That did occur @ 6210, but it failed.
When we look at the R22 ranges, the R44 occurred below the R22 3-period cycles, that is why I partial exited just below the R22 break, because follow through had much less probability, and ran breakeven stops and didn’t trade again that day.
Whereas Friday, the R44 occurred above the R22 cycles, this R44 reversal had a much greater probability of follow through.
And the same applies trading short-term 11 point moves within 22 point ranges, probability occurs when trading in the direction of the cycles….
In conclusion:- The Dilernia model clearly defines market dynamics, trends, cycles, support and resistance, and also the likely path price will travel.
But, day-trading the Dilernia model, won’t always align with certain risk filters and probability patterns, whilst on other occasions it will provide the perfect trade.
Patience is the key....because the good trades will always come.
