I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,725 Blog Posts

TPO Verses P&F Charts

After casting his vote for me, one of my favorite all time reads and radio/television sensation Scott Bleier told me to cut out the point and figure crap.  This was in reference to the TPO and volume profile charts I have been posting for the S&P futures.  Seeing as Scott is arguably one of the most seasoned pros on this site, it’s easy to assume a few others are unfamiliar with TPO charts and how they can be interpreted to glean understanding of a contract’s price action.

First let me very quickly cover the P&F chart.  If you desire more background on the charting method, I’ve linked to two detailed sources at the end of this post.

P&F differentiates from most chart styles by not plotting price against time.  Instead it uses Xs and Os to delineate upward and downward movement respectively.  One goal is spotting breakouts and breakdowns.  Below I’ve marked up the SPY chart.  Notice all of 2012 is contained within five strands of Xs and Os.  Writing about this chart every morning would be grounds for banishment, no doubt:


TPO charts, and more importantly the volume profile, give us much more actionable data.  TPO stand for time price opportunity and each letter (usually) represents 30 minutes of trading.  As the session progresses, the TPOs build up and take shape.  Remember bell curves?  They show up all the time in a balanced market.  My write ups cover the e-mini S&P future contract.  It’s the most traded financial instrument in the world and is derived from the price of the S&P 500 index.

The more time we spend trading at a specific level, the more TPOs build up, and it tells us the market has “accepted” a price as reasonable and buyers and sellers both find the price as reasonable, balanced.  Balance is good, but imbalance and price discovery are where the opportunity to bank coin reside.  Last Thursday was an example of price discovery which led to the gap fill.  You can see the before and after in my posts here and here.

As volume data became more raw, more pure, we began plotting the volume at price to build similar imagery as the TPOs had in the past.  Most current users of this type of charting consider tracking the volume to be more relevant and actionable.  I agree.  If we know where the most volume has traded, we can watch that level and see how the market reacts when we reach it.  If we blow through the level, something has changed and the participants no longer agree the price is fair.

I could continue on, but let’s instead look at Friday’s auction and what it tells us.  First, I very clearly see from the tight range that there wasn’t much action on Friday and the market found balance.  The purple box I plot is the range where 70% of the transactions occurred for the day, using volume at price.  It’s called the value area and people make a living trading around these levels alone.  We closed right near the middle of the value area, but not before the bears attempted an afternoon push lower.  Buyers showed up and price quickly returned to the midpoint.  Overall Friday was a balanced day of market stabilization:


In my next post I’ll cover price areas of interest going into Monday’s trade.  Levels where we could expect the market to pause or explore.


PnF Links:



Comments »

Test Driving The PPT

The halls are decked with holly and wreathed succulents are paring with the aromas of the fire to create a lovely woodsman scent in my home. The animals are lounging and I couldn’t imagine a better way to spend my evening than at home opening Fly’s toolbox, The PPT. The unfettered celebration last night, which brought out the best/worst of my normally politically correct co-workers, was fun and dare I say outlandish. Pare that with the excitement of getting an interim position here, in the hallowed halls, and let us just say I’m just now returning to my senses.

The first time firing up The PPT is like stepping into a formula one racecar. Mario Andretti could configure a car to his exact specs, but you can’t expect to hop in and win the Grand Prix.

Good luck with that

I look for a very specific chart pattern when I enter a stock. It doesn’t always look the same but the methodology is simple. There are two steps. Define a stock’s trend, and trade the pullbacks in the directions of the trend. That’s it, momentum trading. Sometimes I wrap a thesis into my positions, other times I seek diversification of industries.

The PPT clearly can increase the odds in trading with one data set alone, seasonality. I’m thrilled to build my understanding of The PPT scoring systems and building their probabilities into my trades, but I built my first screen to build the seasonality edge into my momentum trading.  Thus the “Comeback Kids” was born, and I like what I’m seeing.

I built the screener to give me stocks that have underperformed their seasonality this month and tossed in a few fundamental ratios and volume thresholds to ensure I’m not getting any garbagio. The idea is mean reversion to seasonality. If any of the results fit a trading picture I like, I’ll stalk come Monday.

Several of the 37 stocks look ready to make a comeback. I really like Cooper Tire & Rubber (CTB). It has the look I like and a thorough seasonality dataset:

It has over 3% of mean reversion seasonality built into it, which coincides with the first logical scale out point, prior swing highs. Getting that first scale means I’ve done my job, and pumps thereafter are the cream (no homo).


Comments »

Lower Your Blood Pressue and Enjoy The Weekend

Scientists have proven that, for men, looking at a beautiful woman lowers the blood pressure. With our damning of society in our real life film noir existence, today’s selloff, and the holidays we could all use some stress relief. If you know my style on twitter you know I only follow traders and models. Together they form a symbiotic stream of productivity. One of my favorites Miranda Kerr and her fellow angels made a video for our enjoyment. Enjoy the following video and remember that the holidays are about love and forgiveness:

Comments »

The Essence of Knife Catching

“We are what we repeatedly do.  Excellence, therefore, is not an act but a habit.” – Aristotle

The allure of buying a stock that has been crushed in anticipation of a juicy mean reversion is enough to zero out many traders accounts.  On the charts, the positions always look magnificent and take almost no heat.  But the nature of a stock cascading lower is much different than what one finds in a pullback of a prevailing uptrend or even a flat liner.  The stock is falling rapidly in value because there are more sellers than buyers, and the price is exploring lower for interested buyers.  It won’t stop until it’s met with a buying force stronger than the sellers so knowing “where you’re wrong” is vital to preventing portfolio devastation.

Setting a stop is something traders always hammer home, but in my experience the essence of success is more than setting a stop, it’s consistently setting a stop in a methodical manner.  I’ll demonstrate my method with my current knife catch, which is drawing blood from both my palms, MLNX:

The levels I’ve drawn are Fibonacci extensions of the prior swing higher.  The idea is participants who successfully caught the knife the first time will have stops placed below their entries.  Often times the market will go on the hunt for these stops and the next move lower is an artificial lowering of price that will be resolved once the hunt is over.  Of course if price continues lower even more selling could be triggered so get out of the way. 

By defining the setup and repeating the methodology over-and-over, I can build statistics on the trade and based on the win-rate I can determine position sizing.  These types of trades aren’t as high a win rate, but the reward much higher, I usually max out at ½ the size of my normal position.


Comments »

Rolling On

How apropos my dear readers that the day of my interim trial blogger status we roll into the March contract.  The contract will exist as long as my trial-by-fire period.  Let us hope both appreciate in value, although the contract’s road is much more rocky and unsure.

Going forward all price levels quoted will be from the March contract.  First and foremost the infamous 1420 level—its 1414 now. That’s an important level to keep in mind today as trade sustained below that level could result in a short trip to 1407.75 the untested (or naked) volume price of control from last Friday.  I’ve placed the two contracts side-by-side below to give your eye an understanding of the levels.  March-13 is on your left:

Comments »

I Drew The Line Here

This morning I highlighted my bias line and suggested you cut your weakling positions early. Yesterday demonstrated indecision and the gap below offered a tantalizing target for shorts. Heading into lunch the market began selling off and the market cut through the bias line. It’s understandable if you didn’t cut weak names at that point, but when the market failed to reclaim the price it was my sign to clear out weak names:


The action in the S&P was still constructive for the bulls and we found support in the afternoon and reclaimed the important 1420 level.  It wouldn’t surprise me to see bulls testing the sellers’ conviction into the weekend by pressing longs into the weekend.

These elections are too close to watch—I have much respect for all the candidates and their hard work up unto this point, but MAN do I want to win.  VOTE FOR RAUL3!  150th blog post HEY-O!

Comments »

Dump The Weak

S&P futures have the markets currently priced to open near yesterday’s close after a fairly large overnight range.  Price failed overnight at the volume price of control (1430.00) and rotated lower to test Tuesday’s gap below.  Since then buyers have stepped back in and stabilized things.

There are a few interesting characteristics in yesterday’s profile.  The value area consumes all of the prior day’s range and is indicative of a wild auction with slight indecision.  That’s of little surprise as the market was digesting the Ben and the The Fed in real time.  Also interesting in where we closed yesterday, right near the value area low, which is to give the sellers a slight edge going into today’s trade.

The 1426-1427 level will be important today as a confluence of yesterday’s close and Tuesday and Wednesday’s value area lows.  If price is sustained below this region sellers may target a gap fill back down to 1420 region.  Should the market not find reactive buying at that point our next level of support is 1418.

Things get fun above 1434 value area high where the fading of the Fed pop began.

Shortest term, bears have a slight edge, but the swing trend is higher giving me patience on my long positions especially stocks like TSLA which are grinding higher.  However, some ugly candles were printed yesterday which should have you considering clearing some weak positions from your portfolio.

UPDATE NOTE:  I sold TSLA after the stock hot knifed lower.

Remember to vote for RAUL3 today, eater of monkey brains and anything else in the quest for knowledge.

Comments »

An Appeal to The PPT

What has been clear since the election began in these most hallowed of hallowed halls is the lack of support I’ve received from members of The PPT.  It has even been speculated that I represent the “anti-PPT candidate” to which I say without question I am not.  When Fly, very appropriately manifesting into Plutonium Petey, dropped The PPT BOMBSHELL on the interwebs, I knew the game had changed.

iBankCoin was my first stop every time I fired up my PC then as it is now.  But I knew the bar had been raised, and I would be left behind.  I was broke.  I couldn’t afford the small door charge to enter the club.  Plus, I figured, fuck it I’ll hang out in the back ally and piece together what I could.

Back then for many devote readers The PPT represented a reprieve from the moronic plebs and a more refined domicile.  I noticed some of my favorite commentary leaving the public forums.  Traders like Moober, Trading Wife, Braveflaps, Anton, Bernie Cornfield, and so many more trickled away.  There were even talks that Alphadog was blogging on the inside, he was always a favorite read.  But I pressed forward on my coin banking mission, knowing I’d eventually pay my dues and take the ride.  Soon Chess and Rage had 12631 and even more of my favorites vanished.

Here we are today, why do I stand alone and without The PPT?

About a year into the founding of The PPT, I started gaining interest in future contracts.  Auction theory was being talked about for the first time by guys like @futurestrader71 and I was impressed.  Something about volume at price is so intuitive.  The more I’ve ventured down this rabbit hole, the more resources I’ve diverted its way.  You’ll quickly find out good data isn’t free.  A decent data feed will run you around eighty bucks a month.  Then there’s charting platforms who charge and you have to find one that fits your plan.  In short, I’ve committed my budgeted annual trading expense allotment (Raul3 the accountant coming out) to advancing my knowledge of futures.  But I’ll never stop trading stocks.

I tell you all of this, members of The PPT, optimates, as an appeal to your better judgment and to offer you a promise.  You traders are more than members of an exclusive club.  You represent everything this site was founded on, the traditions we hold and an ace ability to bank coin.  Should my blog wage from Sir Fly provide a boost in income capable of funding a PPT membership that will be the first place the money spent.  FOR KING AND COUNTRY!

Comments »

Logical Scale

You can stay with your positions and stick some coin in your purse.  I still like ATML and it’s having a good day.  However, my plan dictates taking some profits when price reaches a level where it’s likely to pause at the least.  Don’t over think stuff like this, keep moving:

Comments »

Have Fun With It

Futures are set to gap higher again this morning, and value has gone exploring higher.  Last night I was tired and expressing my disdain for the barrel of monkeys my portfolio has become.  Today I love said monkeys and wish to harbor them into the day.

One of the biggest mistakes swing traders make is over thinking a trend and bailing on it too soon only to look back mouth agape at the profits they left on the table.  I didn’t do that with The March of The Chickens (PPC) and it made my year.  Now I intend to do the same for any degenerate position who wants to continue to run.

The market is going to have to really force me out, either by definitively breaking the 9EMA or by closing below it.  Otherwise, we’re going on a gorilla raid of the shorts.

TAKING TO THE PROFILE…I’m so glad people enjoy this.  As you can see, the S&P 500 has gone exploring for sellers, and price will continue higher until a stronger force of selling is met, because most short term resistance has been cleared.  We want to see buyers hold their ground at yesterday’s high first and foremost, but that could be wishful thinking an excessively bullish. Next level is 1432.25 value area high, if this areas breached we have to be on the lookout for a rotation down to the point of control (highest volume traded at price yesterday) at 1430.75 then things get slippery down to 1427.  It would be clear the sellers have stepped in hard if they can sustain trade below 1427 and could be your cue to raise cash if you’re very long.

Otherwise, if we continue higher have some fun, pop into RaginCajun’s bomb and squeeze screens and find something that fits you for inflicting pain on short sellers.  These are simple market times, simple but never easy.  Stay nimble because we have The Fed speaking today too.

Comments »