The chat room has been deader than Kelso’s nuts lately, but that doesn’t mean it has been bereft of trading opportunities. Yesterday, for instance, for any subscriber who was awake at his console, I put out a trade in the final minutes of the session that could have been worth as much as $225 per contract on $25 of theoretical risk.  The trade was a winner for anyone who followed this simple instruction (lifted verbatim from a post at 3:52 p.m. EST):  “Easy-way…is to bid 1797.25 for a single contract, stop 1796.75. You’ll be on your own thereafter.”

As it happened, the futures bottomed moments later at exactly 1797.00, a tick below my target, and never looked back.  Four hours later, they were at 1800.50, just off a so-far recovery high of 1801.50 (see inset). Usually, when a trade requires that we catch the proverbial falling piano, I advise initiating it using the ‘camouflage’ technique in order to reduce risk to a bare minimum. Sometimes, though, when a price pattern is a perfectly ugly beauty like this one, I’ll recommend getting aboard with a straight bid and an absurdly tight stop-loss. In this case, the stop-loss I advised lay at 1796.75, two ticks below our bid. In the actual event, the low was 1797.00, and it gave way to a bounce, still in progress as of this writing, that was good for a ride of as much as 4.50 points.

Since we habitually keep risk:reward in a 1:3 ratio at all times, the two ticks theoretical that we risked at the outset implied that we could have taken a partial profit (or implemented a trailing stop on a one-contract position) once we’d racked up a gain of at least six ticks (1.50 points). _______ UPDATE (9:08 a.m. EST): The futures look like hell this morning. We’ll have to see whether DaDirtballs, having shaken down widows, orphans and pensioners overnight, will be able to rally ’em back to unchanged in the opening hour. Keep in mind that stocks almost invariably give up ground the week after Thanksgiving. It is next week that the — I hate this metaphor — ‘Santa rally’ traditionally kicks off.

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