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Tim, thank you. I think I have the idea of the coils and the importance of
coordinating them with support/resistance levels. Assuming a fill as
indicated at #2, how much room do you give the initial stop above #2 and do
you tighten within 3 ticks of the top of the coil at point #5?
Earl
----- Original Message -----
From: "Timothy Morge" <tmorge@xxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, May 30, 2001 10:26 AM
Subject: Re: [RT] Coils
> Earl:
>
> That's a classic coil. I would at minimum be trying to get short as the
> fourth "touch" is occurring.
>
> Here's how I trade that particular coil--
>
> Prices make a fast move lower, breaking the up sloping Major Median Line.
> For me, the first and foremost rule now is find a way to get short this
> market if I am not already short OR find a way to add to my short position
> if I am already short. The re-test of Median Lines once they are "zoomed"
> like that is a very high percentage trade--especially if you combine it
> with trading coils and trading fib confluences.
>
> When do I suspect the coil is forming? When price has zoomed through the
> Median Line, I begin looking for any sign of a coil. The third bar that
> closes below the Median Line is a double bottom bar at 1292 1/4. First
> there was a wide range bar lower, then a smaller bar continuing lower and
> then that third bar was an inside bar making the double bottom at 1292
1/4.
> As price makes that low at 1292 1/4 and then begins to rally away, leaving
> the potential double bottom, I am thinking: "Hey! Coil???"
>
> Let me back up a few bars to give you a perspective of how I will count
it.
> Basically, when price made the double bottom mentioned above, I work
> backwards to solidify the potential count and high/low I want to use.
>
> So price approaches and touches the Median Line but does not close a bar
> below it. Price then leaves a small up bar right at the test of the middle
> of the channel I drew in and that entire bar is back above the Median Line
> [I have marked that bar with a wingding character, a red dot with a slash
> through it]. That bar is the "0" point of the coil as I am going to count
> it and I am going to use 1299 as the touch area of the coil.
>
> Price turns lower from the "0" point and makes a low of 1292 1/4. The next
> bar is an inside bar with a double bottom at 1292 1/4. As price begins
> rallying from that double bottom, I am mentally marking the double bottom
> as point "1." Now I look back at the "0" point. It was at 1300. I look at
> the fib retracements from the high at 1319 1/4. The 38.2 retrace is at
1302
> 1/2. Price is currently below the up sloping Median Line and that measures
> 1298 and rising. Again, I am an aggressive seller because price has zoomed
> lower through the Median Line--I want to sell in the area of the Median
> Line, so the coil selling is really confluence for me. Add to that the
38.2
> retrace, which I would be selling, and you see why I am a willing
> aggressive seller here. And this area is a retest and consolidation of the
> down sloping middle channel line I drew in from above as well. That's the
> "edge" I am selling against--this whole area.
>
> Here's what I do: Once I mark point "1" in at 1292 1/4, I put in an order
> to sell at 1299 1/4. That's three ticks below the high of the "0" point. I
> could easily have made it 1299 or lower, but price hasn't yet made a valid
> "2" leg, so I know there is plenty of time if this really is a coil. The
> double bottom also colors my judgement a little--I am hoping for a nice
> reaction higher to get short. If I didn't suspect a coil was forming, I
> would be a seller at the level of the Median Line [roughly 1298].
>
> Price moves up and makes a double top at 1299. I don't get filled and
price
> starts to head lower. I leave my order in, but I will be watching price as
> it sells off. I may have missed my good trade location by trying to be too
> fine...I mark the double tops at 1299 as point "2."
>
> Price makes one lower inside bar from the double tops at 1299 and then
runs
> higher to 1299 1/2. I am short now at 1299 1/4. [I marked this up bar with
> a red square] For me, a very nice bit of luck.
>
> Price heads lower and tests 1292 1/4 for the third time, then rallies. I
> mark that as point "3."
>
> Price then just touches1299 for point "4" before heading lower. Not that
> although price has basically been coiling sideways, the key resistance for
> me is the Median Line and it has now positioned itself above the
> coil--that's why you get an edge by being able to anticipate.
>
> Price now heads down to touch 1292 again and this time, it makes a new
low.
> You can see by the next few bars, the upward energy has been spent.
>
> There is an end of day rule that gives price projections based on the
> height of any coil and how many touches it has made [you can't count
inside
> misses that are close]. The end of day rule has become less and less
> useful, so most people have forgotten about it. But I am doing statistics
> on it right now by hand and it seems to be giving some information when
> looked at with intraday bars.
>
> If this isn't clear or if there are questions, ask away.
>
> Thanks for a great question, Earl.
>
> Best,
>
> Tim Morge
> www.medianline.com
>
>
> At 08:59 AM 5/30/2001 -0600, you wrote:
> >Just to make sure I understand, I've attached a GIF of one of the coils
> >illustrated on your web page and annotated it with a count of 5
"touches".
> >Is this how you count your touches and do I assume that your short entry
> >would be at #4 with something on the order of a 5 handle stop at the 50%
> >retracement? If not, could you post an annotated chart when you have the
> >time?
> >
> >Earl
> >
> >----- Original Message -----
> >From: "Timothy Morge" <tmorge@xxxxxxxxxxxxxxx>
> >To: <realtraders@xxxxxxxxxxxxxxx>
> >Sent: Wednesday, May 30, 2001 8:41 AM
> >Subject: Re: [RT] Coils
> >
> >
> > > At 08:19 AM 5/30/2001 -0600, you wrote:
> > > >Tim, do you have a set of guidelines you use in identifying coils:
> >minimum
> > > >number of bars, percentage retracement of preceding move, minimum
time
> > > >frame, etc.?
> > >
> > > Good morning, Earl!
> > >
> > > I actually am doing work by hand on 13 and 39 min charts of the S&Ps
and
> > > Nasdaq and 30 year bond markets to try to "formalize" my definition
and
> > > also refine some measuring statistics I have that were built on end of
day
> > > coils. I expect coils in general to have 5 "touches" or alternate
closes
> > > before they breakout. By an "edge," I mean that if I am able to pick a
> >side
> > > as the coil is just beginning to form, I can often get great trade
> >location
> > > if I am willing to sell at levels even outside the coil's highs [in a
sell
> > > side example]. So if a newly forming potential coil has confluence
above
> >it
> > > or a strong fib cluster or a down sloping Median Line above it, I will
> > > often try to sell any approach back to the first high bar after price
> >makes
> > > an initial low [I hope this makes some sense]. If I choose a side, I
have
> > > no need to wait for the third or fourth or fifth leg before
entry--which
> >is
> > > how most break out traders trade a consolidation pattern.
> > >
> > > I am seeing good results with measuring statistics and I am hoping
that
> >the
> > > end of day technique will translate well into a measuring technique
that
> > > allows a useful price projection series solely based upon the number
of
> > > touches and the width of the coil.
> > >
> > > Best,
> > >
> > > Tim Morge
> > > www.medianline.com
> > >
> > >
> > > >Also, when you refer to "trading against the edge" of a coil, I
> > > >assume that in the case of a decline you are referring to selling
against
> > > >the high of the coil - do I assume that this means you require a
> >retracement
> > > >to establish the upper bound, decline to establish the lower, then
sell
> >the
> > > >rally by fading the next retracement a couple of handles short of the
> >upper
> > > >bound?
> > > >
> > > >Earl
> > > >
> > > >
> > > >
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> > > >
> > > >
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> > >
> > >
> > >
> >
> >
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> >
> >
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>
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