Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Market Timing Wheat

Figure # 2.20 - September Wheat formed a three-day Reaction swing between May 2 and May 4. Looking at the chart, in Figure #2.20 you can see the Reaction swing formed around the 20-day SMA with the May 4th low just below the moving average. So far the futures market had retraced slightly more than 38% so it was considered a SWING TRADING STRATEGY TR-2 pattern and a buy stop was placed above the pivot high of $3.82 ¾ at (C). The following day, May 5, Wheat gapped higher and began trading at $3.81, slightly below the pivot high of 382 ¾, but continued higher for the remainder of the day and finally closed at 386. This price action the price action had confirmed the bullish Reaction swing and triggered the buy signal. The reverse count from (C) back to the beginning of the SWING TRADING STRATEGY TR-2 pattern (A) equaled 12 days. (The lowest close was on Monday April 17, however the futures market was closed on the previous Friday and left a gap on the chart. If a gap appears at the beginning or end of a swing pattern, I consider it as the pivot high or pivot low. Therefore, the beginning of the SWING TRADING STRATEGY TR-pattern was April 14.)

The forward count from the low pivot at (D) projected a future swing trade date of May 22. September Wheat continued the strong rally and reached a high of $4.41 on the May 22nd swing trade date (E). The futures market opened higher on the trail day but failed to find new buyers and turned lower. The rally had ended and Wheat formed a new bearish TR-pattern that turned that confirmed a sell signal that was followed by lower prices over the next three weeks. The September Wheat is a good example of the type strong trending futures market action that typically follows a SWING TRADING STRATEGY TR-2 pattern signal.

wheat chart
Figure # 2.20 – September 2006 Wheat

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**THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.