Study the past for the future

Hey Market Pilots,

Our abilities as humans to recognize patterns, even if those patterns aren’t identical, is a profound ability. I use the example of a box to help elaborate on how we need to view market patterns. Imagine 100 packages arrive at your house. They all came in a box, right? But none of them were the same. Some of them may have had stickers, tape, rope, or a bashed corner. Some were long, some were wide, others big, or small. No matter the kind of box arrived, we all could identify them as a box.

Now take that and think of market patterns. None of the patterns we trade are identical because each day is infinitely different and so is each ticker. But we can see the similarities that make up this kind of pattern versus that kind of pattern. If we couldn’t do this then it would be much more difficult to trade. The skill comes in the ability to see these patterns through the noise and the infinite number of variations they come in.

Let’s take my Moxie Inverse Trampoline setup as an example. The Premise is that when the Moxie Indicator is below zero (negative momentum) price should not be over the 50 SMA. This configuration isn’t always perfect, but it is right more often than not and is a big deal most of the time so I rely on it heavily to keep me safe, then profitable.

Below is a screenshot of the SPY Hourly. I have annotated it so you can see the visual representation of the Inverse Trampoline setup. None of them are identical, but they all have principles in common that we as humans can identify.

Spend some time with the chart above. Observe its nuances and its trickery (especially the one in the middle). If you didn’t have the Moxie Indicator, the middle move probably would have suckered you long, only for it to be the sharpest of all the declines. How’s that for a trapdoor? 

Above is a screenshot of the SPY Hourly ending 6-12-20. I don’t know exactly how price will move in the coming days, but I have three really good examples of what I should be aware of and on the lookout for. There are some strong forces moving the market recently so anything goes, including this dip being bought and continuing right on up. By studying the past, I have a road map for the possible paths the market may take and can adjust accordingly.

Over and Out,

Your Profit Pilot


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