c04 JWBT016-Busby September 30, 2008 13:48 Printer: Yet to come
Commonsense Market Indicators 53too much, stock prices will fall. In 2007 and 2008, oil has been reaching
historic highs. With China racing toward industrialization, there seems to
be no end in sight for continued stress on oil and energy. Under current
market conditions, oil is also one of my trading favorites.Tracking the Seven Sisters
I begin my analysis at the first of each year. I track the opening price for
each of the Seven Sisters. When they come out of the chute on the annual
opening day of trading, at what price do they debut? As the hours, days,
weeks, and months continue, how will each index trade in relation to their
open? If prices stay above the open, I will look to the bullish side for the
long term. If they are below the open, I will be considering a short—at least
for long-term analysis. I continue my tracking process and as each month
begins, I record the monthly opening price and compare that price to the
yearly open and to the previous monthly opens. I want to know if prices
are trending up or down.
I use a telescopic approach and focus my attention on smaller and
smaller time frames. As each week begins, I add that number to my analy-
sis. In relation to the yearly and month opening prices, should I be bullish or
bearish? In comparison to the previous week’s action, are prices higher or
lower with each weekly open? To gain a perspective of the current market,
I look at daily prices intraweek. When each day begins, I note the open-
ing prices and place those prices in the context of my yearly, monthly, and
weekly analysis. On this particular day, where are prices? Are they follow-
ing an established trend? If so, what is that trend? If not, for how long have
prices been reversing? All of this information gives me insight into the sen-
timent of traders and helps me determine the action that I should be taking.
Each day, I focus on several important times and take note of how the
Seven Sisters trade during these times. I label the price bars formed dur-
ing these significant 30-minute time frames as reference bars. The name
reflects the role these prices play in my trading strategy. As I trade I con-
tinuously refer back to the highs and the lows of these price bars to de-
termine entry and exit points as well as profit targets and stop/loss place-
ment. These reference bars help guide me through my trading day. The four
times that I always watch are 3:30 to 4:00PM(my reference bar number
1 time frame), 3:30 to 4:00AM(my reference bar number 2 time frame),
8:30 to 9:00AM(my reference bar number 3 time frame), and 12:30 to
1:00PM(my reference bar number 4 time frame). When I say that I “watch”
prices during these times of day, I do not mean that I sit in front of
my computer screen and manually record prices. In this electronic age,