December 2 2009 Prep Overlay and Commentary

There was an interesting open this morning. The read on the prep was good and the shallow inside support identified held.

I was not onscreen for much of the day and had no trades today. This is going to be a very light week for me.

The price did not give a chance to buy on a pullback to inside support. It was exactly at the middle point between inside support and resistance above when the market opened.

I have seen this before and have made a couple structural observations that help guide me with exits.

The medium sized extension and failure was able to be projected after the mid range congestion that occurred from 9:30 EST - 10:00 EST.

Had the market pulled back to 1105.00 or even a bit deeper and washed out, then held and reversed, I would have expected a significant run to the upside. At least to 1120.00.

Conversely, had the market just blasted off just before the open or at the open (or opened sitting on 1112.00), I also would have expected a powerful move up.

Since the market contracted and went sideways, there was only about 6 points worth of steam built up and the price only extended to the 1115.00 area.

So there likely would have been a much more powerful run to the upside if the market had either pulled back further or not pulled back as much. The structure behaves in this manner 90% of the time.

The only premium setups I see were a long at the retest of 1112.00 at around 10:45 EST which would have been stopped out or a blind short once 1112.00 got retested and poked through to the downside after the failed extension.

One of my favorite setups is the blind short unconditionally after the break of 1112.00. It has taken me thousands of hours of live screen time to understand that I need to stick an unconfirmed order in that particular spot and let it run.

I will make a video of this next time it occurs.

There is quite a bit in the previous statements if you can follow.

There were two correct trades there but only one winning outcome. Some call it a coin flip but it is much more than that. I wish it was a coin flip. It's easier to be consistent with a coin flip.

When you introduce a stop and a target/break even mechanism into a setup, the probability is that you lose or go break even in either direction most of the time unless you make a discretionary decision.

Having discretion without randomness is the same type of skill that a professional athlete performing at the highest levels has.

You will not find this in somebody's chat room or indicator package.

It is grown from within you after lots of hardship.