In this showcase we'll take at a look at a nice time and price trade that setup today. Here's a chart:

The market started moving up right from the open, following the inverted (red) forecast. This forecast says a top should be due sometime around 10:30 Mountain Time. However we don't know exactly where this top will come in, as the forecast really doesn't say anything about price. So let's take a look at some other tools and see if we can focus in on a reversal zone:

This chart shows Gann fans from the highest and lowest points of the current and previous day. The 1x1 angle is set to move by 0.125/bar, which is equivalent to 0.5 points in 4 minutes. 4 minutes is always an important number in day trading because that's how long it takes for the Earth to rotate one degree on its axis. So we're setting up our fans to be in tune with a natural cycle. This is important. We've also got expansion levels plotted off the first three swings of today. These are shown in blue and use the standard ratios.

Now our job is to look around 10:30 and see if anything interesting is happening. There are really only two things that stand out, and they have been circled on the chart. "Target 1" is our first target, which is a crossing point between the Gann fans. Even better is the higher target, which contains a Gann fan crossing plus 100% retracement level all within a very close spot on the chart. Either way, we're probably going up at least a little from this point.

Time to fast-forward:

You can see that the market avoided the "target 1" crossing point, which quickly took it out of the running as the top. Price has actually come right to our second target and stopped, making this the moment of truth. Notice that we've got a very clean divergence sell signal setting up. All we need is the market to start moving down a bit to confirm and we're set for a short. Note that if the market goes any higher, this analysis will be invalidated and there won't be a trade. Here's what happened:

It turns out that was the high of the day, just as the forecast indicated. The best exit was also given by the forecast and confirmed by momentum and the 9-5 Count. The good thing about time and price trades is that there's really very little risk. If price went much above our forecasted target, we would know that we didn't get the high. In this case it's very easy to bail out with a quick 1-2 point loss. You can do that quite a few times if the winners are around 10 points each. The hard part is to have the patience to sit there and wait for the perfect setups, which tends to take most people out of this style of trading.

Back to Archives

Copyright © 2000-2009 by Wave59 Technologies Int'l, Inc. All rights reserved.
This document may not be copied in part or full without express written permission from the publisher.