Hi, Traders, this is Erich Senft again from "Traders Helping Traders," with another edition of Tricks of the Trade. This week, I wanted to talk to you a little bit about the importance of closing prices in futures trading. I mentioned this in the manual - that I pay attention to how the market closes, as this will often give us a clue as to what prices will do next. This last week we had an excellent example of this in our March feeder cattle trade. So let's take a look at how that's set up.
This was March feeder cattle toward the end of last week. And you can see the market is in a long-term downtrend. Prices have been falling for about the last six weeks, when last Thursday, prices bottomed out and made this high closing price. Technically, in candlestich chart terminology, this is referred to as a doji, where the market opens and closes at the same level. But this particular bar here a few days prior, shows us the same type of activity. So we have two bars within the space of a few days that are showing us exactly the same thing. Namely, the market opens, falls down, hits this price, and snaps right back. A couple days later, same thing-- the market opens, prices come down, and before closing, the prices snap right back. So what does that tell us? That tells us that the market is especially sensitive to this particular price level, which happens to be around $99.50. Remember, I told you in previous sessions that you want to pay particular attention to these bars with these long tails to them because they will often highlight the more important support and resistance areas. And that's exactly what we have happening here. So how do we trade this? Please read the rest of the story on the blog at http://Ez.com/947w Required Disclaimer: Commodity Futures Trading Commission: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
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