Rick Ackerman

Long-time subscriber Dave Isham (DJI) brings deep and broad technical experience to the chat room. In this one-hour presentation, he explains how to use 'fair value gaps' to improve trade entries and exits. A brief Q&A, also recorded, follows Dave's talk..

The E-Mini S&Ps occupied our attention, since they were all fired up over a report that consumer inflation was running at 'only' at 8.5 percent last month. Was there a way to get ahead of the lunatic leap the futures took when the 'news' hit the tape an hour before the opening bell? As is so often the case, diligent attention to 'mechanical' levels on the lesser charts would have done the trick -- with no guesswork and no pain.

We spent most of the hour stalking a trade in August Crude. The first attempt got stopped out, but the reason for this and the ways in which it could easily have been avoided made for an illuminating lesson. A key concept received more attention than usual here: setting up ‘mechanical’ entries at the tail end of rABC patterns. There is also a discussion of the ‘discomfort zone’ that will sharpen your ability to exploit it.

  There are some hidden gems here. As usual, we looked for trades that could be forced, and we found them in plentiful supply. Most of the time we were a step or two behind the trigger but still close enough to see the choices we made justified in real time. The 15-minute chart continues to be the best vehicle for day-trading. We used mostly ‘mechanical’ set-ups, sometimes in conjunction with ‘reverse’ patterns, to fashion triggers and stops.

This was a true ‘impromptu’ session, announced out-of-the-blue during Friday’s steep but boring short-squeeze. Rick provided instant forecasts, some of them tradeable, for more than a dozen symbols. The highlight of the presentation, however, was a technical forecast for a potentially important bottom in Treasury Bonds and a corresponding top in long-term rates at exactly 4.65%. Here’s the list of symbols he covered, in chronological order: S&P 500; NYMEX Natural Gas; Occidental Petroleum (OXY); Wheaton Precious Metals (WPM); JP Morgan (JPM); S&P 3x Bear (SPXS); Enovix Corp (ENVX); Jr. Gold Miners (GDXJ); Fifth Third Bank (FITB); Dollar Index (DXY); Petroleo Brasileiro (PBR); Russell 2000 ETF (IWM); Union Pacific (UNP) and Rumble Inc. (RUM).

  We went hunting for day trades using ‘mechanical’ set-ups during this hour together. Even though stocks have been under considerable selling pressure lately, the opportunities we found were both bull trades that used ‘mechanical’ triggers to get aboard. This was essential in AMZN, a $2800 stock that requires an entry method guaranteeing no slippage. We traded just a few shares, but that’s all you need to make money with a stock that moves as much as this one. The other play was in AAPL, where the 5-minute chart offered a perfect pattern so subtle that we had little competition exploiting it. Applying ‘mechanical’ set-ups on charts of lesser degree yields so many opportunities that it becomes possible to find potential winners at any time of the day one might wish to trade.

We spent most of the session trying to force trades in symbols that looked busy, but we were stymied by a mid-morning lull that followed gap-up openings in many vehicles. The lesson was not without its rewards, however, since merely chasing trades requires all of our logic circuits to be firing properly. Check out the gambit in March Crude, which involved cutting risk down to size in a futures contract known for its nastiness.  

There are some big ideas here that are geared toward avoiding traffic at ‘D’ targets, which have become all the rage with ABCD-pattern players. For starters, we have determined to invert our rules when the patterns are too obvious. This implies, for one, that we will look to get short the first time a C-D rally-leg touches the green line. And we need to be prepared for trends to narrowly miss hitting their targets when we are attempting to trade against the trend. Toward the end, there is material concerning the midpoint pivot, which we used to produce a quick, high-confidence winner in the E-Mini S&Ps in real time. Check it out!  

We considered some of the subtler aspects of rABC trading, including the usefulness of attaching ‘mechanical’ levels to the tail end of reverse patterns. This allows one to get long/short via limit bids/offers, as opposed to using the green line for stop entries. As always, we took a magnifying glass to trades that on first glance looked to be easy winners. Some were, but in a few cases the trades failed by a hair to trigger. Nearly the entire session was spent trying to force trades, which are usually in abundant supply when the lesser charts are used for this purpose.