RULES , TERMS , OTHER

REVISED 6/18/2011

BOT    break out target.  Found at top and bottom of a trading range.  Used for entries.  A trend (into the UTR or LTR) is expected if it breaks.  A FBO, look for the reversal trend.

1. long (or upper)    LB or L
2. middle                 MB or M
3. short (or lower)    SB or SH

Dick Tracy Pattern   named for those 40's hats worn by the public and this cartoon character. Hat rises, parts, rises for another peak.   Looks like a lazy M pattern.  The first leg is up/dn  has a PB, then up/dn again.  After that second push, the final part of the M is expected to move to and exceed the the first leg.

FBO     failed break out of a known S/R

FLIP     the point where the EMA goes from support to resistance,or resist/support.

MAXT moving average exhausted trap PA that stops at accepted S/R. The S/R can be seen at MA, EMA, BOT, TL, at a HL or LH, or a channel. The market plans to continue the trend established prior to the maxt. The trap is for those traders entering the micro trend that creates the maxt, or the micro pullback created at the maxt. Those traders are trapped on the wrong side, thinking the micro trend will turn into a major trend. The failure of this micro will force their exits and fuel the payoff move we enter.

EMA MAXT

MAXT in the TF Chart  6-24-11  (click to enlarge)

The MAXT tends to be at the "head" in H&S patterns.  We look for the MAXT to reverse and develop a new trend where the second shoulder will meet or exceed the first (Dick Tracy Pattern).


Ranges:

The BOTs create three trading ranges.

1. UTR   upper trading range
2. ITR     intra-trading range
3. LTR    lower trading range

RULES:

1. The BOT's establish a trading range, and will direct our attention toward the market direction for the day.
2. The long/short BOT is the entry. Price structure before, or a BOT located near/at the EMA will give more confident to the trade. As a trade, consider each aggressive on the first attempt.
3. When price exceeds a BOT and reverses, it can be labeled as a FBO. (failed break out).
4. Price from a FBO should be watched for a new trade contra to the BOT when it reverses through the BOT.
5. When in a trade: stops will generally be 5t. If the entry is at/near the EMA, consider a 5t failure from the EMA. Example: When the short did not run today at 1317, price moved to where bulls were waiting to enter. Generally, not good for the short. However, we were near the EMA, and a 5t failure for early bulls was expected. It happened, and allowed for an exit to the trade without damage.
6. When in a trade: profit will be +1 partial, and breakeven. If one contract (C), then the target is +2, with a stop moved to +1. For all cases, one purpose for the BOT's: we assume a trend will develop after the break. Once price is +2 from your entry, consider adjusting your stop into profit and follow the TL. Generally, this is approximately 50% of a control bar, or 1-2 bars behind the price. A control bar is one of significance. The 9:10 AM 6E bar or b13 at 10:30 would be examples. The 6E targets are +5 or +10, AND follow the trend.
7. Look for flips  as entry points.
8. Look for trades at the 50% level of a control bar.  This is stronger if a prior low/high level can be identified at/or near the 50% level.
9. Look for the EMA cross of the BOT value.  When the EMA crossed the BOT, the market is now in the UTR/LTR mode.  On 6/24/11 the EMA crossed the short BOT around b5-6 on the 5m chart.  At this point, the market itself is short biased.  The market had been in a bear channel and broke higher.  This BO can confuse traders to be bullish.  The EMA/BOT cross left no doubt about the day's direction.