Monday, December 19, 2005

Traders Helping Traders Big Weekend Edition - Part Two - Tom's Trades

Greetings everyone! This will be the last edition of Tom's trade for the year. Updates will continue this week through Friday. The next edition will be posted as of January 7, 2006.

I want to thank all of you for your support throughout the year and hope you will continue to do so over 2006. We had some setbacks this year that prevented us from completing a number of programs. 2006 is going to be a banner year for us and I personally hope you'll be with us to benefit from the things we've planned to roll out this coming year.

Of note is the video of the seminar is all but finished. It has taken a LOT longer than any of us anticipated to accomplish this. We shot so much that we created a real editing nightmare to get it right. Drew has been very busy at school and I insisted that he not sacrifice any school projects to get this done. In addition to his class work he shot 3 movies since the seminar, 2 of which have been accepted at several Film Festivals. No doubt in the years to come you will see his name in lights as they say.

My recovery from the back surgery continues and I'm ready to travel. By the end of January we will have a seminar schedule ready to release. Our little endeavor has made it through its infancy … the crawling stage is over and we're walking upright. This is the year we learn to RUN! We're working on an energetic schedule but it's required to jump start the new year.

I've been invited back to do another online seminar at the Chicago Board of Trade. This one will be very controversial as I unleash my Russell trading methods on them from the perspective of the Dow. The reason we're doing that is the Russell is a CME product and the Dow is the CBOT's baby. I expect hearing our theories on short stops and ambushing the market will stir up the pot pretty radically. I applaud the CBOT for being courageous enough to allow some non mainstream thoughts to be presented. It'll be interesting at a minimum.

All righty, then … let's go see how we finished up the week just concluded and lay our traps for the game crossing our path in the ensuing week. From all of us to all of you Happy Holidays, Merry Christmas and a most fruitful New Year!

TRADE REVIEW:

MARCH TBonds

We opened buying 113-03 in quite light trading. Bonds sputtered and wheezed their way to 113-10, we rolled the stop to -07 and they nailed us there for plus 4. We bought -03 again. This time they could only reach -08. We bailed at -07 making another 4 ticks and sold -07 also. We made it down to 112-30 and I exited at 113-00 picking up 7 more. That ended the day as we were into the final hour. On a very quiet and sluggish day we managed our way to 15 ticks, $468.

MARCH 06 Eurodollar

By the hair on our chinny chin chin we remain short from 95.250.

DECEMBER Canadian $

I watched as the market virtually played dead all day. It never gave us anything to play with.

DECEMBER Swiss Franc

Volume fell off to nearly nothing as LTD for the Dec comes up on Monday. I sat aside. They didn't give us numbers to trade anyway.

DECEMBER Mini Russell

We opened the day selling 689.50 about 8:45 CST and exited 687.70 for $180 as it rose back above our 687.50 number. In this case the "once broken" applied at 687.50 instead of the more often used whole XXX.00 number. I bought 687.90 about 9:15, weathered a small pullback and exited at 689.90 for $200. Next up at 10:35 we sold 689.50 which we exited at 686.20 for $330. This trade ended the day as the close loomed closely. Total for the day was $710.

FEBRUARY Gold

We sold 508.40 and got stopped at .60 dropping $20. We then sold 508.60 and went on a bit of a bumpy ride culminating in an exit at 505.50 for $310.

MARCH 06 Cotton

I was too wrapped up in the Bonds and Russell to get anything done here. Looks like a buy of 53.0something was a possibility. You'd had to have been awfully quick and a bit lucky to get it, I think. Even then it is doubtful if you'd have made anything as it snapped back awfully swift. MARCH 06 Cocoa

Nothing done here either.

MARCH Wheat

Consistent with guidance in Wednesday's Daily Update, I sold 3.22 ½. We spent the day sliding south allowing us to exit at 3.18 ½ for a nice little 4 cent scalp, $200.

NEW TRADES:

MARCH TBonds

The Bonds are back tapping on recent highs at the 113-08 resistance. It will be interesting to see how we react up here. If, as many are suggesting, the rate hikes are done or nearly so we may make some advance from here. Friday's close right on the 113-00 line at -01 have us poised to play at 113-16 or 113-00. The possibility is there for an open and drop which will put 112-16 in play.

MARCH 06 Eurodollar

We continue to be short from 95.250 with a stop at .265. We settled Friday's session at 95.250 so the opportunity to get into the trade should be there again on Monday for those who resisted or missed last week. Get a sense of direction before you pull the trigger. We could easily head higher or lower from here. I would not buy off this line preferring to wait until 95.300 to resolve itself.

MARCH Canadian $

Last Trading Day for the cash settled Canadian Dollar (which is why there is no First Notice Day) is Tuesday 12/20 so we'll go ahead with the roll to March 06 beginning Monday. We find the CDH6 at a very crucial level sitting between major points of Support and Resistance at 8660 and 8640. Actually, I see 8660 as a range extending from 8667 to 8655. We'll sell a retest into 8655 or above that fails as it breaks back below 8655 with a stop at 8663.

We'll forego the buy as I can't make sense out of the RRR. We'll roll the short trade stop to B/E at 8642. The target is 8580. We'll do adjusting rolls at 8634, 8323, 8600 and start a squeeze at 8590. We'll also sell a break below 8640 if we don't get the retest higher. The stop is 8647 … the target and rolls can then be picked up from the 8660 trade above.

DECEMBER Swiss Franc

Last Trading Day for the December Swiss is Monday, 12/19 so we'll start out with March 06 first thing Monday. The first level I'll play is at 7830 (actually a range 7828/7834) buy selling a failed retest at 7828 or above as it comes back below 28. The stop is 7837 with a B/E roll at 7820. The target is 7680.

We'll do rolls of the stop at 7800, 7775, 7760, 7745, 7725 and 7700 where we'll start squeezing this trade pretty hard. If we don't get the retest and we start falling away, we'll sell a break of 7800 with a stop at 7803 and a B/E roll at 7791. You can then pick up the management from the trade above.

MARCH 06 Mini Russell

682 becomes 682.50 and we add 680 as changes for this week. So here is the array of in play numbers for next week: 695, 693.50, 690, 687.50, 685, 682.50, 680, 677, 674, 672, 670, 667, 665, 663, 660, 651, 649, 645/644 as a range, 641/640 as a range, 633.50, 630 and 625.

If we can take out 695 we'll probably start a sustained move higher which may make trading a touch difficult for us since that will take us into territory devoid of structure. Be patient if that happens. We don't want to start chasing.

FEBRUARY Gold

We're approaching a 50% Fib retracement level which clocks in at about 500. Things have been picking up for us using the $10 Channels. We'll continue to play only with that tool for now. We're right in the middle of the 510/500 channel with Friday's close at 505.90. Sell a move into the 80th percentile, buy a move that tests inside the 20th using all the confirmation and indecision rules.

MARCH Cotton

I still feel there is no reason to change our approach as detailed last week. 52.25, 52.75 and 53.25/30 are emerging and we'll use them for rolls but I'll stay with the .00 and .50 as my only entries. We'll play any and every .50 and .00 point level from 53.50 to 51.00 with the exception of 53.00 which we'll ignore. Do one roll in between each .50 and .00 level. Stops are at the next highest 3 on sells and the next highest 7 on buys.

MARCH 06 Cocoa

I'm only interested in 2 price levels to attempt entries. First, I will sell a retest at 1480 that fails to punch higher as it falls off with a stop at 1483. The roll to B/E comes at 1471. The target is 1395-90. We'll roll stops at 1461 and then once below 1452 we'll use that as as the trigger for a "once Broken" play. That means if we get below 1452 we'll be gone if it rises back to or thru that price level.

We'll continue to roll at 1440, 1420, 1407 and on a break of 1400 we start a squeeze trying to force them to take us out. If we don't get the higher retest at 1480 we'll sell a break below 1452. Pick up the rolls and target from above.

MARCH Corn

Pretty simple to arrive at the only trades I'll take … 2.10 and 2.02/.00. We'll buy the break above 2.10 and look for 2.22 as a target. I'll also sell any failure at or near 2.10 looking for 2.02. I will buy any test into the 2.02/.00 area that fails and turns north. The initial target is 2.10.

All of these trades are scalps so penny and a quarter stops and rolls to B/E. Take any measurable profit and don't be afraid to take them quickly. There will be other opportunities I assure you.

MARCH Wheat

The situation in the Wheat is much the same as Corn with only 2 price levels where I have deployed my ambush assets. 3.24 and 3.10. We'll sell any failure at or near 3.24 much as we did last week with some moderate success. We'll also buy a break above 3.24. At 3.10 we will ONLY buy on a retest that fails and turns higher.

As in Corn I view all these trades as scalps so … penny and a quarter stops and rolls and we take measurable profits when they appear without regard for longer term moves.

That's it for this edition. Check out the Wednesday Webinar if possible.

EDUCATION PAGE:

As I wrote earlier in this edition we will begin trading the Dow tomorrow. I'm devoting today's Education Page to setting the table for our launch tomorrow.

First, you can get all the salient details on the Dow by visiting the CBOT website or cut and paste this URL: http://www.cbot.com/cbot/pub/page/0,3181,1063,00.html

We will be trading the $5.00 mini Dow with a symbol of EYM. This symbol may vary from provider to provider. Consult your provider's symbol page to get the correct one for you.

We will only trade during the hours of the full Dow contract open outcry session which runs from 7:15 am until 3:15 CST. We will be trading it on our electronic platform … same as with the Russell.

I'm hopeful we can do this without impacting our Russell trading but that may be wishful thinking. What is in our favor is that I will trade a much smaller array of numbers in the Dow. We'll see and adjust as necessary.

The point value for the $5 mini Dow is … $5 per point … so a move from 10941 to 10931 is valued at $5 X 10 points or $50. Currently margin is $2632 per contract. I KNOW for absolute, positive sure we will NOT be carrying anything overnight so you need to check with your broker to find out how you will be treated regards margin. We are, for all intents and purposes, daytrading.

In my own case I've committed and my clearing firm has agreed to $500 per contract as minimum account equity to trade. You want to have this agreed to in advance so you don't place a trade and have it blocked or impact another trade by putting you in a margin call situation.

We will be attempting to trade the DOW just exactly as we do the Russell. Some of you older subscribers will remember we started off last year doing both the DOW and Russell. This isn't then such a radical move as we did fine then as well but had no where near the frequency of trades as with the Russell, so I dropped it.

The Dow is the 30 largest, strongest "Blue Chip" companies whose stock is publicly traded. There is a "divisor" which takes into account stock splits, etc. so its value is not a simple arithmetic adding of the combined share price of each component company.

We'll see how this goes and I'll update you periodically as I see things to be careful of or any changes I make. Here are the numbers we'll use to kick off tomorrow:

11020, 11000, 10980, 10950, 10940, 10925, 10900, 10875, 10830, 10800, 10750, 10700, 10650, 10620, 10600, 10550, 10500, 10450, 10425, 10400 and 10300.

Wish me luck!