Nickajack Creek Trading Co., Inc.

Support and Resistance Day Trading

December 11th, 2007

12/11/07 Trades

I took no methodology trades today because it was a Fed day.  On Fed days, price movement before the 2:15pm EST Federal Reserve statement release is usually unpredictable as price moves in anticipation of the annnouncement.  According to auction market theory, if the news differs than market expectations, buyers and sellers will move price in a search for a new fair value.  Today’s Fed announcement was for a rate cut of 25 basis points.  The market’s expectation was 50 basis points.  The difference in the actual news and expectations caused the DOW to drop nearly 300 points.

I took momentum based short trades on the ES when I saw the market nose diving after the Fed announcement.  I traded the ES because it’s heavier than the YM.  The ES trades many more contracts which keeps the spreads tighter with a little less random volatility in fast moving markets.  However the ES was initially moving so that I could not adjust my targets quick enough so I took several rapid trades at market price as my targets were hit.  I then employed Mike Reed’s ‘slinky’ technique (see ‘Read the Greed’ on the Resources page) as the ES tumbled down.  I ended up taking 9 trades in about an hour; 7 good wins and 2 small losses.  This was definitely risky trading, but the down trend seemed so obvious to me that I had to keep riding it until it proved me wrong.  The end result was a very profitable day.

December 11th, 2007

12/11/07 Daily Support and Resistance

Here are the daily support and resistance for the YM, ES, and 6E (Euro futures):

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