Noel
Campbell 		The SPI 200 has experienced a remarkable run up over the past few days, perhaps exceeding the expectations of even the bulls in the market. Over the past couple of weeks, I referred to the potential for an opportunity on the short side, relating to the recent Double Tops in September. I can personally testify to the good profit opportunity that presented itself with this short trade. If you were still holding that trade, the story would be very different now. Suffice to say, I have long since covered any short position.

This week I'll review the set-up and how it was managed. The Double Tops were formed on the 9th and 19th of September. The entry signal was given on the 22nd as the market broke the low of the 19th. The entry stop was just outside the 33% limit, however with time backing up this trade I stretched the entry limit on this occasion. We were in Perth at the Trading Tactics Two-Day Seminar on this day, so there was a sense of excitement in the room as the market headed south. The first point to note is how confidently the market moved through the 50% milestone, refer to circle 1. This was an excellent sign that this was a good trade. On the 23rd , the market reached the 100% milestone and here you can see the first example of The Power of Pressure Points, as the market bounced the following day, refer to circle 2. A number of traders may have been stopped out this day, my stops were still behind the 50% on this occasion. One point to note is the volume on the 24th was relatively low compared to the 23rd, indicating the rally was simply a retracement.

Chart 1


click chart for more detail

The 25th gapped down below the 100% milestone and the trade was off again. Placing stops 8 points above Point B (3181) allowed this support to become resistance. The market started getting volatile over the next couple of days, finally reaching the 150% milestone (circle 3) on 1 October. Anyone who has studied the Road Map chart knows the strong emphasis David Bowden places on this 150% milestone. This is where having the discipline to trail your stop loss, rather than getting headstrong about a trade, becomes clear. Trailing the stop 10 points above the 150% milestone has you stopped out on the day of the low, at 3161. The worst case scenario would have you stopped out 8 points above the open after the gap up on the open of the 2nd, exiting the trade at 3183. The volume on the 2nd was over 17,000 contracts, hinting that this time we were looking at more than a retracement. Anyone left holding short positions beyond the close of this day will have learnt a great deal from this experience. This yet another great example of The Power of Pressure Points.

Until next week......

Noel Campbell