So far, the 50-day moving average on the Standard & Poor's 500 chart has been acting as a good support level during February (Figure 1). Not only is it acting as a support, it has also showed signs of a slight upward bend. This tells me that I should only go long when trading the emini contract. Now it's a matter of waiting till the right opportunity comes.
On February 16, 2005, at around 11:07 am (PT), I noticed an increase in buying enthusiasm, but that quickly faded (Figure 2, page 88). That was unfortunate, because for a moment I thought my original plan to trade at around 11:00 am (PT) might still be something to capitalize on. Twenty minutes later, I noticed a similar scenario--that is, a buying frenzy followed by a quick selloff. The selloff, however, was on less volume than the buying, which told me that there was more buying enthusiasm.FIGURE 1: Daily chart of the S&P 500
FIGURE 2: Five-minute chart of the March 2005 emini contract
But would there be an opportunity to open a long position? Only time would tell. After all, trading and patience go hand in hand. At 11:30 am, I saw that buying enthusiasm appeared again. I was tempted to place an order, since the trend seemed to be moving up, albeit slowly. After all, I did have another hour and a half. I decided to go for it and opened a long position on one contract at 1209.50.
It just so happened that things didn't go my way. It seemed as if prices weren't going to go higher than 1209.78, after which prices started falling--rather rapidly, I might add. I thought it best to exit my position. But then, just before placing that exit order, I noticed a slowdown of the selling. This made me hesitate about placing that order, and in my pause, I noted a sudden surge of buyers. Apparently, Federal Reserve chairman Alan Greenspan made some bullish statements about the US economy, and this, not surprisingly, sent the markets rallying.
All I can say is that it's a good thing I stayed in the trade, because at 12 noon I was able to get out at 1212.75. It is at times like these when 30 minutes seems like an eternity.
Patience certainly has its role in the trading world, but so does luck and seeing the right things at the right time.
--Jayanthi Gopalakrishnan, Editor
Originally published in the April 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2005, Technical Analysis, Inc.
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