Jacobs Ladders Weekly Rewind for the Week of October 30th
Jacobs Ladders is a pivot based trading system that provides perspective on high quality, profitable trade setups for day traders. The purpose of this blog is to educate day traders on this trading system and provide links to the levels on a daily basis. You may wish to bookmark this page.
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The objective of the Jacobs Ladders is to help day traders identify and capture a minimum price movement between any two adjacent pivot points. This system when used correctly will improve the consistency of winning trades and helps minimize risk and losses.
In this weekly blog series, I will point out set ups that occurred during the past week that are illustrative example of how to use Jacobs Ladders for day trading. These examples have been tweeted out on our public twitter feed, you can follow along here @the_artofchart.
For more educational information, please see the previous introductory post introducing Jacobs Ladders day trading system which can be found here.
S&P 500 Emini Set up Examples
There were two Extreme Low 1 pivots this week for the Emini S&P 500. I have previously pointed out on few occasions that an extreme Low1 is an sell exhaustion area in a short term basis and a bounce could continue to the next session. It could also be a low for a few sessions to come, one will have to assess overall context and can decide whether to keep a runner going. In this week, Stan had called for higher prices and the second Extreme Low1 hit of 61.25 was such an example case
All this said, it does not mean every single Extreme Low1 hit is going to bounce 10 points. If bears take control, consecutive hits may only give a small bounce and yield continued selling. We have been on an incredible bull run so it is easy to forget how quickly market can change. During 2008-2009 period there were many occasions where Extreme Low1 gave just a 2 point bounce and continued selling.
As usual every single day of the week, ES Jacobs Ladders Pivot Levels provided setups to make a 4 handle move except Tuesday. It was a crappy extremely tight range day on Tuesday . If price does not move, hard to have a decent set up. I add charts from Monday to Friday to illustrate this
Crude Oil Futures
The inventory report day on Wed had good price move. So did Friday. Both days, Jacobs Ladders levels gave very good tradable set ups. Bottom line, whenever price gives a good move, there is always a level where price tend to pause. Watch for such levels support or resistance and latch onto it for a trade.
Friday was another stellar day on levels. Price bounced hard from level Low, just three tics front run all the way to Extreme High 1
Personally Friday was very interesting to me. I am already on a swing short on crude at 54.04 for few days . But seeing price is holding high and bouncing strongly from level Low on Friday, I used /QM which is half sized crude contract to go long on Friday and captured 40 tics thereby increasing my base price of short to 54.44
QM being half size contract is a good tool to have on CL if your account size is not big enough to trade multiple full CL contracts, just like similar smaller size contracts in Gold and Currency futures. Or to hedge a swing.
A Case for Chase
Normally chasing price is not a good idea for day trading. But there is a set up I find useful to chase. When Price does a push down but not deep enough down to do a limit order against an established level like Low or High. So naturally the next opportunity is breaking the level above and back test it for support. It takes experience and situational awareness to understand days like this. When this happens, the only way to get on board is to chase but against the level above that is currently being converted into support with a hard stop just below. One must have a hard stop and a tight level to lean on when chasing a trend.
An example is Friday, the day of Non Farm Payroll. Price sold to Lower High and demonstrated support. But if you hesitated or did not get in a trade, then next stop to catch this train by waiting for a conversion of the next level. So if you believed in the bulls, then you can lean against Open with hard stop just below. This model happens a lot on ZB and CL.
I hope this educational post helps you understand how to use Jacobs Ladders. Please look for our educational posts on our public twitter feed at @the_artofchart.