vlad.adrian
Short

CME - Nice shorting opportunity

NASDAQ:CME   CME GROUP INC
201 5 3
The chart is very messy, so I will walk through everything I've drawn.

1. A weekly H&S pattern, it's clear on the daily too. Target about 60$. A weekly close below 68-69 would confirm the pattern.
2. After a lateral movement since the start of the year, CME             broke the rectangle and retested it.
3. Look where the last retracements ended, at 50% of the rally/decline. It seems like the current rally rejected the 50% fib of the decline.
4. Look at the volume and its MA of this rally. It is very very light.
5. The MACD histogram is allready at a level where rallies usually end, and started ticking down. It looks overbought, and consider how little the price advanced.
6. The EMA's are perfect dynamic support/resistance areas, from where to enter in the main direction. Currently price is at its EMA's.
7 Suport levels are taken from the weekly, and if you zoom out you can see their importantce also on the daily. What is really nice is that we have a confluence of harmonics exactly at these levels. The 2nd and the 3rd targets both have the 'D'/'d' points of an AB=CD pattern. Besides this, target number 2 has also the 1.618 fib of the 'bc' rally.

All these facts point to a clear short for me. My bias is short on the US market, and I believe Monday will be an important day which will give us some hints of future prices. But, CME             does not have a good correlation with the US market, so that is a plus, cause if I am wrong on the US market, CME             doesn't necessarily move with it, at least not for long.

Because of the clear support areas, I wan't to make a trade plan and follow it. I will manage the trade as follows:
1 Open a trade if there is no big gap up at the open, that would automatically put this trade on stand by. Stop loss at 72.30$.
2 Take 30% off the table at the first target, and set the stop to breakeven. If CME             is going to continue down, it shouldn't touch my entry level, as it is quite far away.
3 Take 40% off the table at the second target. I will move my stop above a swing high above the first target, by that time there should be a clear one, at least on the smaller time frames. IF, after reaching the second target, there will be a retest of of the 65-66$ level, with a shorting signal, I may want to add to my short position. Otherwise, I won't be adding anymore to my original position.
4 Close out the trade at the 3rd target. This is very far away, and if CME             will go there, I do not want to keep anymore of my original position.
entered short at 70.31 on 28.04.2014
stop at 72.32
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vlad.adrian PRO vlad.adrian
19.05.2014 closed half of the position at 70.02$. It's taking too much time for CME to fall, but the reasons for entering short still stand
snapshot
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vlad.adrian PRO vlad.adrian
29.05.2014 Got stopped out at 72.32
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Thank you for your deep analysis. I have a question. Point number 7 you mention harmonic ab=cd. I do messurements and was seeing an Alternative AB=CD pattern with deeper ratios which line up with support. http://www.fxgroundworks.com/alternative-abcd-pattern/

Is that not a better pattern to look at with the further ratios to extend ab=cd?
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Thaank you!
When I look for AB=CD I do not calculate the CD extension of BC according to the BC correction of AB. Lets assume we are at point C of an AB=CD pattern. Normally you would check how much the BC leg retraced into AB, and then look for the corresponding expansion of the BC leg to find the D point, then expand the AB leg to see if they match. I don't do that, mainly because it is not a pattern I use very often, and it's never a reason to trade, I use it only if it corresponds with support/resistance levels, so I allow myself to bend the rules and keep it simple. The AB=CD patterns I have drawn on the chart are only extensions of the AB leg, they don't include retracements and expansions ratios of the BC leg. I believe that too much discipline when analyzing a chart clouds vision, and the simpler the research the better the outcome.
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