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Earl:
The more general case would be that I would have a stop in at three ticks
past the point "0" top at 1300, so at 1300 3/4.
By the time point "4" forms and price is making a new low, there are now a
handful of high bar tops at 1299 and change. You can certainly move the
stop down to 1299 3/4--I probably would not bother.
In the more specific case, with these confluences above the coil area, I
would be a sell at various levels above 1300--the re-test of the Median
Line, the re-test of the down sloping outer channel, the 38.2 retrace
[though once a new low is made, that level would change slightly]. I might
be tempted to have a stop above the confluence of the 38.2 pct retrace and
the outer doen sloping channel line--they are both at about 1303 1/2 or so
by the end of the coil.
The general form is more conservative and is probably the way to trade most
all coils, at least as I define them.
Tim
At 11:59 AM 5/30/2001 -0600, you wrote:
>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
> > > > >
> > > > >
> > > > >
> > > > >To unsubscribe from this group, send an email to:
> > > > >realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > > > >
> > > > >
> > > > >
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> > > >
> > > >
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> > > >
> > > >
> > > >
> > >
> > >
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> > >
> > >
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> > >
> >
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> >
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>
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