This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Babak (one of my favorite bloggers) wrote an interesting article about the The Great New Pattern.
The concepts of capitulation and euphoria are nothing new, but they take courage to trade. Here is a chart of the QM (miNY crude). You can see where I shorted the breakdown of a symmetrical triangle that formed over the session. I also marked where I covered. I normally use the concepts of capitulation and euphoria to exit positions, but there is a ton of money to be made, using it as he suggests.
On Friday you can see where the longs threw in the towel (capitulation). With 15′ left in the trading session, it printed a hammer like candle. The following bar was narrow range, and showed strength. This was a prime opportunity to take the type of trade Babak pointed out. However, I didn’t have the guts to pull the trigger. I highlighted it in blue (thick line). With about 10 cents risk, you could have grabbed a quick 70 cents. That may not sound like much, but the miNY crude contract (QM) pays out $500/point. That’s $50 risk for a $350 gain for each contract.
{blush} Thanks
The markets are fractal in nature so yes, the GNP can be played in different time frames. Take a look at the weekly chart during and after the 9/11 shock. And in any market since what you are really trading is emotion.