Trader Scott’s Market Blog
September 5, 2016
From my August 21 post regarding a short term silver trade that I believed was in the PROCESS of setting up, but not yet having “broken support”, so not yet my entry point, but getting there – this is what I wrote:
As a free service, I can’t/won’t give specific trading advice. The chart below shows the shorter term view of silver futures, which is a market that I’m interested in on a trading basis. One of my favorite trades is a market that’s in a fairly clearly defined TRADING RANGE/SIDEWAYS TREND. The accompanying chart shows that the upper side/RESISTANCE is around $21 and the low end/SUPPORT is around $19.20.
I always buy into weakness. The majority of people get scared when a market is falling. They then get bearish and they’re afraid that the market is going to go below the SUPPORT area and then keep falling. That particular situation is actually one of my favorite entry points into a trade or investment. That’s because I understand/respect/believe in SUPPORT and RESISTANCE areas. So when a market “breaks a SUPPORT area”, I actually will often step up and buy (dependent upon the technical price vs. volume situation at that time). If the technical structure of that market is showing the downside pressure is abating as it trades in its’ RANGE, then a “break of SUPPORT” is a very low RISK/high PROBABILITY entry point into a market. And conversely it’s a situation when most people think it’s the worst time to enter. The great Richard Wyckoff called this particular situation a springboard entry point.
When the market did “break support” several of you wrote to me and told me they didn’t think that trade will work out, which is always a possibility with any particular trade. But I know the very high success rate of this type of trade setup, and that is my only concern.
And the first chart is the exact chart that I posted then, followed by the current update.
Now here’s the update:
As I stated, I love to buy into markets that have supposedly broken support. The * below shows the big (relatively, on a short term basis) selling wave, which closed right at the low. The corresponding volume saw a very large pickup. That “alerted” me to the PROBABILITY of the “manipulators” wanting to “break support” thus triggering sell stops. That’s what happened and I love that trade. The support was around 19.20. The beautiful volume characteristics appeared. And this is another example of a Wyckoff spring. I have taken partial profits and now it’s about RISK MANAGEMENT of the trade.