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(Since this is the Market Of The Week as well, a carbon copy of this Fdate
Update is also going out to the TTC list, Realtraders list and some news
groups.)
10/7/97
Greetings Fdate Members!
Well, as mentioned earlier, I finally exited that Hogs trade from last weeks
Fdate. What a nice ride down that was. Might even go down one more time
tomorrow, who knows? <g>
Anyway, probably the market on many of your minds is Feeder Cattle. Yes,
this week we are due for a weekly botttom. Where that bottom ends up we have
all week to find out. Hopefully, however, we've already found it on FD+1
which was today.
Closing so close to the bottom always makes the possibility greater that we
may end up with an invalid Fdate if a lower low is made. A couple of points
or so won't matter, but a good move down would be unfortunate.
Rules wise, this trend is down and so the conservative trader will want to
want for a trend change first to go long. I'm playing the aggressive side
due to the knowledge of knowing that we are expecting a weekly bottom
coupled with an FD+1 day.
I did enter near the close at 7655. The low of the day is 7645. Now,
remember that number because I would like to provide a shade of hope (don't
fall in love with this market, however, if it does break the low) that we
may have our bottom in.
In W.D. Gann's book, titled "How to Make Profits Trading in Commodities", on
page 68, he says the following:
"The basis of our money is 100 cents to a dollar. Long years ago we had the
dollar divided into bits. People talked about one bit, two bits, four bits,
and one dollar. They have become used to dividing the dollar into eighths,
and they want to buy and sell on this basis. This makes these natural
resistance points for prices in Wheat, Corn, and other Grain, which are
Resistance Levels, or buying and selling points for Wheat, Corn, Soybeans,
or Oats. By going over past records, you will see how often BOTTOMS and TOPS
come out at these natural points."
Interesting. So, I took Feeder Cattle and found the major bottom and top for
our current run downwards and found the bottom made on 2/10 @ 7460, and the
major top on 7/21 @ 8430. The total range equals 970 points.
If you divide this by 1/8ths, each 1/8 would equal 121.25 (970 divided by
8).
So, 1/8th equals the low of our range, 7460, plus 121.25 for a total of
7582. To find 2/8th, we just add another 121.25 and we get 7702. Note how
1/8th is below our current low of 7645, and 2/8th is above it.
Note what else Gann said on the same page:
"The dollar can also be divided into sixteen equal points, or 100 can be
divided into sixteen parts."
So, if we divide 970 points, the range value in Feeder Cattle, by 16, we get
60.625.
Noticing that our current low falls between 1/8th and 2/8th (7582 and 7702),
we will then use 16ths.
We know that 1/8 = 2/16, and 2/8 = 4/16, so if our current low falls in the
middle, let's solve for 3/16th.
Each 16th = 60.625. Multiply this by 3 we find that 3/16 equals 181.875.
Add 181.875 to our major low of 7460 and we get 7642. 7642 is 3/16th of the
major range for our downmove. Does that number sound familiar?
Should, our current low is 7645.
Now, like I said, this does not mean it will indeed hold. But today, it did
prove to be resistance as Gann said it would, and also provides us with a
means of deciding how far we may wish to let it go against us. Remember that
1/8th was 7582. For me, this would be a risk of 73 points, or $292 per
contract, plus change.
Thought you all would enjoy this.
cheers!
:)
rick
*****
FutureSoft Publishing - Precision Trading
>>>>> http://FSoftPublishing.com <<<<<
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