Friday, July 24, 2009

Momentum Pattern I

I will from time to time post patterns as I see them.

The first one is a momentum pattern in Natural Gas Futures. These futures are fast, usually have iceberg orders in the market, and can spike really lovely.

Take a look at this 10-Tick chart


I highlighted such an iceberg order, which was renewing itself. The market had tested the daily low and failed a few ticks above at 3.704, it went up and someone tried to sell it down again. But there was a lot of buying in the market, which you see in that nice line formed in the chart. The buying relaxed a bit, only to spike through the line in the sand, which is your signal to go long.

NG can run 40 to 60 ticks, still 3.750 was resistance in premarket, so I was wary when I saw the divergent wave pattern. I took the hint and exited with +20.


Here is another example of the same pattern at the above mentioned resistance level


As you can see it first failed, but there was support 10 ticks below and the market continue to try for a break, which eventually happened. Never forget: It's a momentum pattern, so don't hesitate to bail, in case it fails and don't expect home-runs.