Traders Helping Traders Big Weekend Edition - Part Two
PLEASE NOTE: Erich has some technical problems this weekend and won't be able to produce Part One of the Ezine.
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the Another week in the books and half of September is gone. This brings me closer to the October/November crush. Jacki's birthday is 10/10. She has mastered the process of making the whole month hers. November 1st we will celebrate our 25th Anniversary. With the trip to New Orleans off the table the pressure is on to find a substitute activity with sufficient pop to appropriately celebrate the best thing that ever happened to me. The thinking cap is on.
The week past treated us well … a pretty typical week, in fact. Steady, no big surprises or upsets and no big scores, either … just the way I like it. Let's go close out our remaining trades from Friday and move on to the coming week.
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TRADE REVIEW
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DECEMBER TBonds
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We sold 114-28 and got stopped out at -31 TWICE. Down 6 ticks, $187. We then sold -29 just in time to catch a run down to 114-15. We bailed at 114-17 for 12 ticks. That was the end of my day as it turned out. There were some opportunities to do buys at -21. I didn't see any green and after a while the volume dried up to the point there was no sense in attempting anything.
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MARCH 06 Eurodollar
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We had sold 95.825 on Thursday. Friday gave us a nice pop lower. I had planned to hold the trade over the weekend but when we got to .730 late in the day I thought it was a great what's most likely number after a quick look at the chart so I took it … out at .735 for $225.
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DECEMBER Mini Russell 2000
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I was a bit cautious entering on Friday. When the window opened we were bouncing between 671 and 673. I couldn't see a clear buy above or sell below 672 so I sat on my hands for a spell. After 4 failures in the high 672's I sold 671.70 and exited at 670.00 for $170. I sold 669.70 and bailed at 670.70 losing $100. I sold 669.70 again and exited at 670.10 losing $40. Next up we bought 670.40. Game on. I exited this one at 671.80 for $140. I bought 672.40 and exited at 674.80 for $240. I called it a day there.
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DECEMBER Gold
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A good sized gap up started the day throwing us into the 460/470 channel. We got a nice pullback and a confirmation. I bought 461.50 and was stopped at B/E. We bought 461.50 a second time. When we failed at 463.50 I jumped out at 463.20 for $170.
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DECEMBER Cotton
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I bought 49.60 on the bounce off 49.50. We tried but ultimately got stopped at B/E
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NEW TRADES
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DECEMBER TBonds
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There is a growing sentiment that the FED will back off on further rate hikes to facilitate the rebuilding of infrastructure destroyed by Katrina. That will probably cap the amount of further downside in the short term. I doubt we'll go any lower than 113-16 in the near term. We closed on Friday at 114-24. We'll be focused initially on 115-00 and 114-16 to kick off Monday trading. -08 and -24 are really almost out of the trading picture completely. Only an extraordinary set up would get me to take a shot at either.
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March 06 Eurodollar
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95.725/.030 is the current big line for us. I'll sell a break below .725 and buy a break out above .730. .0735 is the stop on the sell and .725 on the buy. The sell target is 95.575. We'll roll to B/E at 95.715. Additional protective rolls at .695, .675, .625 and .590. The target on the buy is .850. Roll to B/E at .755 thereafter at .775, .805 and .825.
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DECEMBER Canadian $
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We'll roll out to the December contract beginning with Monday's trade even thought LTD isn't until Tuesday. OI and Volume have fallen off to a point where it's the right thing to do. Unfortunately, I do not like the look of the DEC chart at all. We should re-label it "Gap City". I can only get behind a couple of trades at this time. I will sell a break below 8420 with a stop at 8427. The target is 8340.
The risk of, hopefully, less than $100 gives us about a 10:1 RRR. Roll to B/E at 8411 and make additional rolls at 8405, 8370 and 8350. I will sell a retest of 8500 as it turns and heads south. The stop is 8503 on any fill above 8490. I think the night boys will take care of this one and we'll never see the opportunity … you never know though.
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DECEMBER Swiss Franc
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Likewise Swiss, we roll to December contract beginning tomorrow. NO SEPT TRADES! We have a limited choice here as well. I will sell a break below 7920 with a stop at 7927 for risk of $125 max. We'll roll to B/E at 7913. At 7903 or lower roll to 7911 and below 7998 bring the stop to 7903. From there we'll roll at 7880 and at 7860 we'll begin a serious squeeze into our target at 7850. The RRR is about 7:1.
I will also buy a retest of 7920 that fails to press lower as it turns back higher. Place the stop at 7917 for risk not more than $75 (meaning you must get a fill of 7923 or lower) and roll to B/E at 7927. The target is 8050. That gives us RRR of 20:1. That's very unlikely so we'll protect this trade all along the way by making rolls at 7950, 7975, 8000, 8025 and at 8040 we start the big squeeze.
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SEPTEMBER Mini Russell 2000
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We are making a few changes in our number array. We'll add 678 and 683. 682 comes off the play list and we add 666 in combo with 665 and call it a range. That means at that area we sell breaks below 665 but make buys ONLY on breaks above 666. Here they are … 687, 683, 680, 678, 676, 674, 672, 670, 668, 666/665 as a range, 662, 658, 656, 654, 647, 645, 632. It's obvious the array of playable numbers has shrunk significantly from September. This poses management problems for us as we do not have the quantity of management tools to work with as we did in the past month. Soon we will be there but not right now.
We combat this by utilizing the "Once Broken" theories. This means, as we saw last month, it is a process of building momentum and exercising patience. Our results will not, in all probability, be as solid as they were in the later stages of the last contract trading. It is very important that we realize, accept and act accordingly. I would suggest printing out the previous numbers from our September array and anticipating they will materialize again as players. Using this technique is acceptable ONLY for management purposes, NOT for trade entry. You dig?
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DECEMBER Gold
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I'm very close to declaring Gold a "no buy zone". We'll continue to play the $10 channels for now but will be extra tight in managing any buys at this level. I'll watch for a few days and then make a decision about no buys. Keep an eye on the daily updates.
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DECEMBER Cotton
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We again have a number of trades to consider. We'll start with 53.00. Either a buy or a sell will fly here. We'll buy the break above with a stop at 52.83 for risk of $100. The target is 54.50 giving us an RRR of 7.5:1. We adjust stops at 53.30, 53.50 and 54.00. We'll also sell a retest that fails to drive higher as it begins to fall hoping to get filled no worse than 53.85. The stop is 54.07 for risk not to exceed $100. The target is 50.50. We'll adjust stops at 52.50, 52.25, 52.00, 51.80, 51.60, 51.23, 51.00 and at 50.80 we go into squeeze mode. The RRR here is about 12:1.
I don't think we'll get past all of the intervening support levels on the first pass so we should view it as a much skinnier trade than 12:1. 52.50, 52.00 51.50, 51.00 and 50.50 and 49.50 are all playable numbers in either direction. Pick up the management from above. In the case of 49.50 add rolls on a sell trade at 49.35, 49.10, 49.00, 48.85, 48.65, 48.50 and 48.25 on the way to the target at 48.00. We will buy a retest of 48.00 if it fails and turns back higher. The stop is 47.97.
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DECEMBER Cocoa
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The only trade I will do is to buy a retest at 1370 that fails to drive lower as it heads back north. The stop is 1367. The goal is 1430. Rolls at 1380 and then every $10 higher. DECEMBER Corn I'm going to stand aside tomorrow and watch. I think we're going lower but with no structure I'm unwilling to bet money on it. I'm sorta' tempted to buy a break above the double bottom from last week. I won't though. I'll take another look at Corn for the update tomorrow but for now let's be spectators.
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DECEMBER Wheat
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I'll buy a break above 3.26 ½ or sell a failure there. Stops and rolls to B/E at a penny and a half. Should we see a retest at 3.18 I'll buy one there. That's it for this edition. Check out the Wednesday Webinar if possible. It is one of the true perks of following along with us.
-Tom
