Market Finding Support? | Trading Futures
good morning everyone john mcnichol and welcome to another fantastic week of education with td ameritrade you have reached trading futures our topic today market sold off will there be some dip buying or not we'll take a look utilizing tools such as fibonacci and pivot point so stick around all right well hey it's great to see those you that are live with us today such as vijay el diego tm radio wayne krishna we got charles ray rabanna frank sherivas and everyone else mr ken rose is helping out on the chat any questions i am unable to get to he'll be more than happy to help you can see my twitter handle on the screen at j mcnichol underscore tda if you wish to follow myself along with other fine instructors such as ken uh his twitter handle is uh at k rose r o s e underscore tda it's a great way to learn more about your instructors as well as hopefully learn about the markets as well let's take care of disclosures folks we'll get right into it the contents provided for educational information purposes only not investment advice or recommendation of any security strategy or account type options not suitable for all investors please read the previous added copy of characteristics and risks of standardized options uh we encourage practice what you learn here today with tools such as paper money software keep it in mind that application is for educational purposes and successful virtual trading with one during one time period does not guarantee successful investment of actual funds during later time periods market conditions change continuously keep in mind futures futures options trading involves substantial risk not suitable for all investors please look at the risk disclosure provide for you here also futures futures options trading services are provided by td ameritrade futures and forex llc those trained privileges are subject to review and approval not all clients will qualify make note of commissions as well important factors should be considered when evaluating any trade and while this webcast may discuss technical analysis other approaches include fundamental analysis may assert very different views as well as a stop-loss order will not guarantee an execution at or near an activation price once activated they compete with other income and market orders there's brief background for those of you that may be unfamiliar with me i along with ken and other instructors been around for a bit and certainly covers the wide scope of investing such as stocks options futures both from a shorter term as we're discussing today as well as a longer term which is probably a good opportunity for me to point out if you haven't already registered well there's my twitter right there if you wish to follow but if you're on the td ameritrade website or on the thinkorswim platform go into the education tab uh under webcasts you'll not only see the webcast schedule for today but if you take a look at the calendar we do have our education day uh coming up on wednesday uh you should see a tab at the very top of the education tab with that link where you can go ahead and learn more about the content for that day i will be uh teaching a subject on uh etfs and uh this is live so uh if you have an opportunity go ahead and register bring a friend we'd love to see you there all right let's go ahead and get right on to the platform and uh we're looking at uh forward slash es the s p uh mini futures we can see they are down about uh a little more uh close to about one and a half percent uh we did have a low little bit earlier uh for the purposes of this class i i went flat uh on a a short uh s p futures basically have been short over the entire week and a lot of that was tied into a lot of our discussions from uh going back to monday as far as with fibonacci retracements and also relatively uh weakness of the market we'll talk a little more about pivot points in a bit but just a quick highlight we have been but down below those weekly pivots for the most part all week kind of pointing more towards that bearish sentiment now we did have a pretty significant drop overnight is there potential for a snapback or a dip well let's take a closer look at that uh let's go ahead and bring up on the daily chart on the s p we talked about this last week uh as well um let me go ahead and bring this out a little bit more about over the uh last year in particular as far as with a lot of dip buying closer around the 50-day moving average now this is a 55-day exponential moving average i have on the chart a little play on fibonacci there and as we look at that that generally had been working up until over this last week where we did have a penetration below that now some traders may toss some other moving average to anticipate some levels of support uh you know like 100 day or 200 day and we're well away from the uh the 200 day but if we do go to studies and uh bring up edit studies start off with a simple moving average although the other average i have is a exponential i'll double click on that go to the gear and we'll plug in 100 we'll go and apply that and now it's 100 day moving average in this case on the s p futures is you know right at around that 43 just above 43 20. and when we talked about fibonacci last week we applied it to the most recent swing up and as far as drawing those retracements drawn with the trend so we'll select that percentage tool drawn from the low to the high and as we were observing this last week on monday we talked about the 50 retracement uh which was barely holding and that's 61.8 which some traders may refer to as a make or break point now with that uh going into tuesday we saw a breakdown to that 61.8 uh an attempt at a bounce but notice that we did not get a follow-through price did not close or trade above the high of that previous day likewise kind of consolidating at that fibonacci and finally a breakdown friday's close broke below the 61.8
retracement and we had some follow-through today as prices basically retraced and took back those lows so that 61.8 again can be uh you know a potential significant pivot point there now if we go ahead and go back a little bit more on this bullish trend go back to the previous low on that 55 day moving average we already had a full retracement of this if i go and draw the fib from the low to the high what we're looking at here is ratios notice as we stand right now as far as from the lows in july we basically retrace that 61.8 level that was also one of the drivers on me closing out at least potentially temporarily that short position at least with an attempt to hold that 61.8
we go ahead and translate over into the uh shorter term chart uh looking at a uh this is a 30 minute chart some traders may look for a bullish reversal over uh whether a 30 or an hourly time period and notice we did have a reversal over that 30 minute time period as prices traded above the high of that low period okay let's go ahead and take a look at a five minute chart and as we look at the shorter period here let me go ahead and minimize this a little bit and we can see more of that downward trend you know what some traders may do is try to isolate that trend go drawing tools trend line basically drawing down off of that resistance so we can see that trend from last night and we can see a break above there now right now we're pushing up on one of the pivot areas now there's a oh certainly a ways to go as far as more of a overall bullish reversal of the overall trend the daily pivot which looks at some of the previous price action and kind of a midpoint is up around the 4429 along with the weekly pivot which i have in gold here now on adding those pivot points and actually before i do that what we're going to do is uh i'm going to go ahead and go long one contract on the s p futures here on our practice account since we're breaking above that pivot there would have done it earlier just do a stop in reverse but wanted to get an example in during the class so we're long one contract there now i didn't put in a a stop loss we'll do that in a moment there as well as talk about a target and just want to try and get something in while we're talking at the same time um keep in mind as we look at the forward slash es and go ahead and take a look at futures uh the amount of capital that's required initial margin is about seventeen thousand three hundred dollars that's going to be based off of uh you know volatility and expected moves that can change that can be a significant amount for smaller traders keep in mind another example we do have forward slash mes which is the micro contract the multiplier on the one we're looking at right now forward slash es is fifty dollars per point uh you can see since we opened uh that position that would be about a tick there and that was the p l from the overnight uh on a larger position we had about five contracts uh in there that been hedging the previous week um let's see where i'm at here so notice here on the mini or a micro if you're doing the micro uh that's a five dollar multiplier uh so that uh you know could be more potential for a smaller account with that less equity there now if we go ahead and let's pull this back here talk about as far as potential risk uh you know one way of looking at this is uh setting a a potential stop whether below a previous low or below one of these pivot areas which may act as support another approach which we've done as well if we're expecting the price to not necessarily fill the gap but possibly retrace somewhat going into a previous close may look at the range of the of the s p on a daily basis and one reference of that looking at a daily chart uh utilize an atr uh average true range we have a five period on here if we look at the current value for uh the atr on a daily basis uh 55 37. if we go to 55 37 i'm going to go ahead and bring up a calculator here 55.37 and multiply that by a percentage uh in this case i'll do a percentage of about 40 percent basically a little under half of that daily range and that would be about 22 points now with a multiplier of 50 22.14 multiply by 50 that would be theoretically risking about 1100 per contract on the day so if i went ahead and had a stop that was offset about 20 i'm going to roll i'm going to actually round that to and a half to the nearest to the nearest quarter point let's go back to that five minute chart what i do is i can right click go ahead and sell or actually we can right click on the actual should be able to recl well it doesn't allow me to do that let's go ahead and uh go to the active trader here so the active trader can basically show our positions here as well uh what we can do is i can go back to uh click on sell make sure it's the same number of contracts we'll go ahead and edit that and what i can also do here is also create a one cancels other first triggers oco we're just doing oco since we already have a position so if i click on oco i can right click on the other position create a duplicate order so we can basically plan on selling it at a particular stop and then also a limit with a potential target now we can make these gtc uh even though the idea is to close them out uh by the end of the day uh for the example we're looking at if one was looking at taking a position uh then they may consider adjusting uh that stop accordingly and if we go ahead and do that one as far as with the stop and i'll do it based off of our entry price our entry price was at 43.67
now another way of doing it is uh setting it off based off of the opening price as some traders may be initiating it closer to the open but for illustrated purposes i'll do it 22 and a half below 46 4 43 67 75. so we'll do 43 67 point minus 22.5 okay that would be at 43.45 so i'm going to go ahead and set that example onto stop 43 35.
let's make sure you got the right that's 25. if one wanted to make a a tighter stop uh based off of the pivot points one may consider that too i'm going to go ahead and on the limit i'm going to put it about 20 points above that entry price so i think that would put us at 43 point or 43.87 0.5 i'll go ahead and adjust this afterwards so we basically bracketed by about 20 points on the other side so hit the confirm and send and send now that took me a little while to walk through that uh you know that's one way of uh creating an order once you've already done a trade uh the other way of doing it is once you've already uh if you consider entering into a position and putting the orders at the same time we can utilize those bracket orders uh by just go ahead and click on the template and you do have a default on uh trigger with bracket which will basically go ahead and create the opposite orders and you can also offset that as well by a certain number of points by just modifying that on both the up and down side and then once you make those modifications you should be able to see a little save icon here on the right and if you go ahead and save that then that would be part of your template that's why you can see that we have a few examples here with a uh 20 point bracket 10 point brackets things like that okay um and in this case uh on uh with our example here if i pull this out you know as far as certain targets uh you know we have about you know 20 points theoretically at risk notice that actually does point us a little bit below the low of the day there if we do have a significant move let's say we were targeting you know up to you know this next level of pivots uh once we make about half of that move consideration may be to go ahead and adjust that stop to a break even potentially reducing the risk keyword potential there's no guarantee that the stop would be filled at a particular price uh you know to account for slippage as well as with market orders they compete with other income and market orders all right so as we're kind of setting off right now you know we we did have the pop a little bit of a flag in action there a little positive to you know see that price action stay above at or above possibly some of those previous highs we'll see how that develops now there's no guarantee that this is going to be the reversal day and that prices will go ahead and trade up uh to those higher highs you know we can easily see a fade here and prices possibly continue breaking down if there was more of a bounce we can utilize fibonacci uh the opposite way on anticipating where some of those uh bearish reversals may be or a bearish bounce looking at the daily chart as far as a larger time frame as a reference here let's go to our drawing tools take a diagonal line and you know identify more of that slope there now while it's doing this too let me go ahead and double check uh on some of her questions there i do know that ken's doing a great job of helping out here today let's glance over and tm yet made reference to the 100 day moving average and uh let's see here if we're taking a look at some of the other questions here someone asked a question about what the asterisk is next to the current study in the drop down i'm not sure what reference is ken if you if you saw anything on that let me know and uh ron as far as on the size of the account uh i don't have the direct information for you i believe it is 25 000 you need to have the available equity to trade that and uh it looks like you got your answer there on the drop down there andrew all right looks like i think we're caught up there thanks for helping alan there ken just make sure we didn't miss anything quick glance a little roll over there on the five minute there so looking at on the daily chart uh as far as with this correction here if we go ahead and go to the drawings and take the fibonacci see where some of the potential resistance areas may be uh on the week one wants to look at shorter term they may draw from uh this uh this high here but looking at from the high down to the low uh you can see how that 61.8 level kind of correlates with where that price had broken down and what we can do is if we switch over to the intraday charts we may be able to see uh some confluence with these fib levels along with the pivot points now as far as with the overall trend if this is a stronger trend to the downside one may expect to see some reversals at or below the third or the quarter level as well as the third okay and with that those can be some potential resistance areas if we go ahead and switch to that five minute chart should be able to see some of those levels on here as well for instance you can see the zero level there represent the low here's that quarter retracement uh which is just above pivots uh on both the daily and the weekly the sawtooth pivots are basically looking at history going back the last five periods uh whereas the round one is looking at previous periods so if you uh want to simulate something like this i do have a shared chart uh over here under the scratch pad also pointing out you can see my twitter handle there if you enjoy what you're learning here today make sure you consider clicking like that way other people are able to see it and this is part of the trader talks channel if you click on subscribe you can see other content and also turn on notifications and be alerted to what may be coming up so if i go ahead and uh take that little uh script there keep in mind it is case sensitive if you are transcribing that i will paste it into the chat for those of you that are live with us those you listen to the archive session can follow up type it in yourself we go to setup in the upper right hand corner open shared item and go ahead and plug that in so we went and we plugged that in click on import and if you typed it in right it should bring up a pop-up chart that may look something similar to this now with this example it actually has forward slash mes that's the micro contract which is the five dollar multiplier but you can see the technicals uh are the same uh we have a daily chart on one side and we have a five minute chart on the other side i'm going to right click on this five minute we'll maximize that if you want to modify make it your own you can go into the beaker for the edit studies so if we click on the edit studies here you can see we have the pivot points listed here uh pivot point for the day pivot point for the week if you were to add it on your own you can double click on it also notice the question mark if we click on the question mark for that we can see a breakdown on how those pivot points are calculated which is basically plotting some support and resistance levels based off of previous day or a previous period and it's usually taken a look at the highs the lows the closings openings to come up with that calculation now once you add that by double clicking on it moving off to the side you can go to the gear and switch periods it defaults to a daily period we're looking at a daily pivot but we've also added one for a weekly you can just do that by simply changing the time frame the other differentiator is in the case of the weekly i made that gold so we can tell the difference between the daily and the weekly pivot and you can modify that however way you wish okay so we have that on there along with uh atr at least on that five period there we'll click okay uh if we go ahead and we take a look uh at this example here so we can see where we're at uh on currently we traded down to some weekly uh support on the pivot as well as with the daily we're getting above there so it's given us a a little bit of confidence uh as far as the initial reversal at least shorter term not looking at this as far as necessarily being a a daily reversal of the correction last week but at least looking for a counter move possibly trading higher we're still setting up at least in the positive direction that way with the long contract and then notice on higher levels one may be targeted these pivot areas in this case that would be about uh to 43.81 let's say just 43.82 and change there if we were going
to target that area based off of let's go and switch over to our position see we're currently down about 162 on that position from where that entry was 43 67 75 was the entry uh if we were able to trade up to uh that 43.85 that would probably be a gain of about uh was about uh about 18 points uh just shy of that we go to the calculator if we were to take 18 times 50 that would be a game potential gain of about 900 all right and again currently we have about a little over about a thousand uh dollars at risk and again looking to see if we're able to trade a little more midway into that area and then possibly go ahead and adjust that stop up okay now there are other questions can one do more of a defined risk trade you know on this as well utilizing options absolutely uh you know if we go ahead and go to the trade tab one can see that there are options uh on these uh however which would be another class keep in mind there are other ways of trading options on indices such as the spx the ndx uh as well uh that would be another class since this is futures uh but uh if you were you know wanted to say you wanted to do uh you know a long option or or a call spread put spread uh you can apply the same principles that both uh can and i teach let's say if you were bullish on the market expect market to go higher over the next 23 days one can go ahead and look at an example of let's say a put spread now keep in mind we haven't had a daily reversal yet but just trying to illustrate that uh let's say we look at uh just to illustrate some of them may have like a 30 delta if i right click on that do a cell vertical one can go ahead and apply the same principle notice here pretty wide spread here but let's say that was a dollar credit liquidity is a concern uh keep in mind that's not a dollar credit it's going to be times the multiplier which is 50. so theoretically that could be a 50 credit while risking the spread which would be 200 dollars there so yes you can do that we we have done some spreads in the past uh on some other commodities uh for instance uh gold i believe is one that we have in here let's see if we can bring that up so we basically have a put spread uh currently on gold forward slash gc uh with seven days expiration uh not looking fabulous but still a defined risk the idea here is we had sold a 1780 so we're expecting a gold to stay above 1780. it's not doing that so if we go ahead and look at the chart for gold forward slash gc and you can see uh the idea was looking at more of a bullish reversal uh of gold uh but we've seen commodities taking a hit as they've kind of broken down and blew into the previous shoulder there we're seeing a little bit of a consolidation so let's just double check on the position 1780 is the goal with seven days left one may ponder okay well is there enough time for the price to trade above 1780.
well unfortunately we were trading above 1780 just three days ago so it's certainly foreseeable that we could possibly touch or come close that area over the next week since we do have a little bit of a doji possibly a little more of a hammer may give it a day or two to see if we're able to trade up into that may turn this spread into profitability so as you can see we do have the opportunity of doing uh different spreads kind of more of a defined risk trade so let's go ahead and review on what we've already done so uh we've kind of followed through on what we've discussed last week as far as fibonacci we're looking to see where that potential support was and also the ramifications if that price breaks down we can see on how when those fibs broke down there could be some accelerated momentum to the downside in this case we did re-test that previous swing higher now if we go back and look at things from a bigger perspective as we kind of go from the days to weeks possibly going into weeks to months we kind of drew that ratio over a larger period and we're able to identify that today at least briefly an attempt to hold that area now if there's a failure to take out those lows we may see some more momentum to the downside so let's talk a little bit about that let's go ahead and bring up forward slash es again and as we mentioned retrace the last swing as far as the previous uh when we go back kind of more into the weeks to months kind of in that 10 to 12 week period we basically have retraced to around the 61 percent area and then did get a little bit of support again for those you may have missed it earlier low to the high and there's that 61.8 and at least an attempt intraday to hold that now a confirmation on a daily basis uh would be basically a bounce uh you know whether it's an inside day and a follow follow-through on price trading above the high the low day uh that is you know certainly needs to claw its way back to be able to do that so the the example the trade that we did was a very short-term reversal at least attempting to come off of those lows looking for at least a counter move to trade up in the range of the previous day and as we do come towards the end of the session still negligible there looks like we're kind of flagging you know re-testing the pop at the morning we'll see if we get that move and again looking for at least a positive move to the upside to potentially reduce the risk on the trade by adjusting the stop and the idea with this example is potentially closing out this position before the end of the day if the price does not hit whether the target or the stop okay so very short-term trade if we look at the daily chart actually showing more of a bullish reversal uh then may consider uh looking at a longer duration okay all right let's see what else we can uh tackle here uh today um we could probably apply this with some of the other areas of the market i'm going to bring up a daily chart and let's go ahead we got a one year we had already looked at gold let's look at crude forward slash cl and uh crude is off uh today but notice as far as reversing we did have an example of a inverse head and shoulders seem to have a lag of my drawing tools today we did have a nice breakout next week last week and then we're kind of flagging you notice the low actually came ahead and retested uh that uh previous breakout so at least an attempt on the dip here earlier in the morning if we go and pull this out one thing to keep an eye on from the correction as far as crude where could a potential resistance be let's apply that fibonacci tool now since we're looking at a potential potential resistance from a downward correction we draw with the direction of that move in this case from high to low and then notice on a positive front at least at the moment is that 61.8 crew did break above that area more of a break which helps supports this bullish reversal and now withstanding the slide over the last three sessions you know we may have a flagging moment now a little bit of a tipping point we are actually below that 61.8
so this potentially could be a fake out if we see some momentum on the downside but you're interested to see if we're able to see crude kind of get a close uh closer to that 71 area versus below 70 there and then a lot of you may be tracking with uh with china and a possible default on one of the largest real estate companies there it's going to bring up copper more of the base metal and you know commodities overall have been struggling anybody's been following materials uh we've seen a lot of more ranges a little more towards the downside notice here with fibonacci to the upside from that spring rally we have been violating that 61.8 so not exactly a bullish trend more neutral here okay we can also apply the same method to the downside if i go and right click let's remove that example and draw from the high in the spring down to the low and look for where that bullish reversal may be and you know that would have to be getting back above the 50 and as an example that's 61.8 we're seeing a dip down on copper now could be wishful thinking but something to keep an eye on you know will those metals retest the lows or will we see a higher low and you know potentially continue building out whether it's a bottom in formation or an inverse head and shoulders but doesn't look like we're seeing necessarily seeing the bounce there on uh copper today and on that note there let's go ahead and do a quick glance of the major markets and then we'll uh we'll call it the day here let's go ahead and bring up on the daily chart i do apologize i'm a little bit some must be running in the background here uh causing me a little gremlins hopefully it's unnoticeable to you guys there and looks like we may be failing a little bit there let's see here and we're just kind of trading back in that range there so we'll see how things develop for today we're not seeing a huge bounce there but we're seeing it gravitating around some of these pivot points there we'll see how things play out let's go ahead and bring up some of the other major markets here let's go ahead and look at the russell ford slash rty now the y extra characters are bouncing in there plus we've got had a similar bounce uh on the russell uh whether that may be fading again kind of a break at the downtrend see if that develops anything some resistance on those weekly pivots looking at it on a daily chart just kind of still in that range but what's interesting is where the s p took out their lows uh i believe from middle of last month uh the russell is still relatively hanging in there again kind of get that comparison there uh that was the russell and then here is the s p okay s p took out their lows i believe the dow took out their lows russell kind of in the mid-range and then if we look at the nasdaq forward slash and q we're seeing uh still actually trying to hold in this case a 55 day moving average but i'm assuming it broke its 50 day still staying above those lows but not necessarily getting a bounce here today so whether it's uh happens today or not at all possibly turn around tuesday in fact look at the nasdaq nasdaq is actually fading back uh to their lows from the overnight all right folks looks like we'll have to kind of end it off there let's make sure we covered down on what we intended here today we went and we looked at the market open we talked about fibonacci levels and we utilized pivot points uh this could be some tools to potentially utilize over this next week as you uh take a look to see if we have a reversal in the market or continued downside and uh we had a little validation with our fibonacci analysis from last week as far as with those breakdowns and seeing how that can translate into that momentum i would encourage practice what you learned here today we share the charts with you as far as with the pivot points fibonacci does take a little work just like support and resistance tools but hopefully you can find that to be fruitful in your technical analysis uh so do appreciate you joining us here today do appreciate mr ken rose for helping us out on the chat and uh appreciate you following along each and every week we'll let you go for the day coming up next at the top of the hour is going to be getting started with technical analysis with cameron may so have a great day folks bye now you