Joshua Martinez: Don’t forget to look left. Before we get started, don’t forget to subscribe and click that bell down below.
Joshua Martinez: Hey everyone. Josh Martinez here with tradersagency.com and welcome to this week’s idea. Today’s date is July the 13th, 2020. In front of us, we have the S and P 500 E mini symbol where every tick is worth $5 for every E mini contract. Every tick is worth about 50 cents for every micro E mini.
Joshua Martinez: What we’re going to do here in a few moments is basically break down the markets to decide direction, potential entries and exits, one exit for risk management and one exit for profit. We do have Josh from behind the scenes who’s going to help us break down this market.
Joshua Martinez: Welcome, Josh. You haven’t been on in a while.
Josh: Good to be back.
Joshua Martinez: Even out in the beach and on the boats and basically doing everything that I want to do, but you’re doing it so I’m happy for you. All right. All right, we have the daily timeframe and the big question is going to be how do we find a trade? Josh, would be the first thing that you’d do if you wanted to find a trade on this?
Josh: To see if we’re either in the buy or sell zone.
Joshua Martinez: How would you do that?
Josh: First, make sure we’re on the daily and then draw my channel with my up or down trend lines.
Joshua Martinez: What would be the purpose of drawing your trend lines?
Josh: Just to see a general market direction.
Joshua Martinez: Well, trend lines in general, what they do is one of three things. They separate the market from buy and sell zone, they let you know market speed, how fast, how slow the market’s moving, but most importantly, they let you know where the mark U-turn because those U-turns are opportunities.
Joshua Martinez: What we want to do is we want to begin to basically what we can do is work our way back. A lot of new traders, what they will do is they’ll start from this bottom low, and then they’ll do something like this and they’ll say, “Oh, we’re in the buy zone.” Would you agree with that?
Josh: That a lot of new traders?
Joshua Martinez: Yeah.
Josh: Yes.
Joshua Martinez: Real frank everyone who’s watching this, this is nothing. You have one U-turn and two U-turns. This is a huge mistake. A lot of it’s because this is just how we’re taught, but there’s textbook. There’s book smarts and there’s street smarts. It’s on the job training type of scenario. The purpose or the why’s of what we want to do is want to find the U-turns, and a way to do that, not the way, but a way, it’s just basically go back in time and find these previous lows and work your way back. What you discover is you discover an area of U-turn.
Joshua Martinez: Now take a look at this Josh. Would you agree that this market is doing a decent job at forming U-turns at, on and around this bottom blue level?
Josh: Yes.
Joshua Martinez: Ultimately what we want to do is we want to begin to say, number one, if the market stays above this blue line, more than likely it’s going to continue to push up. Why? Because it happens, starting April, it happened one, two, three, four, five, six times so far.
Joshua Martinez: Now, ultimately, what does that mean for stock placements? If you’re going to buy this market for longer term, where do you want to place your stop?
Josh: At a previous low.
Joshua Martinez: Right. You want to place your stop below the blue line, because if you think about it everyone, if this blue line pushes the market up, for whatever reason why you decide to buy, place your stop below the bottom below. I’m not a CTA or money manager so I can’t tell you, but according to the odds, placing your stop below the uptrend line makes the most logical sense because if the market were to fall, this blue line could in theory push the market back up, meaning that you’re not getting stopped out and then the market going away.
Joshua Martinez: Usually what ends up happening is when people get stopped out and they lose money, usually a few hours later, or a few days later, it goes the original direction. It leaves a real sour taste in their mouth. You can potentially try to solve that.
Joshua Martinez: Now, the other thing is going to be if the market forms lows as this bottom blue level, then realistically, the market’s probably doing the same thing but on the opposite side. What we begin to see here, is we begin to see a high price, a high price, a high price, a high price. What we can do is begin to extend this. We can begin to extend this. Let’s just go ahead and delete that like so.
Joshua Martinez: Josh, would you agree that this market is forming highs at, on or around this top blue level?
Josh: Yes.
Joshua Martinez: In theory, the basics would be market touched the bottom level, it’s on it’s way towards the top level. In theory, this market could be extending bullish at least 300 ticks on the way up. Right?
Josh: Yes.
Joshua Martinez: If that’s the opportunity, you can go to the smaller timeframe. You can use tunnel trader, destination trader, Fibonaccis, [inaudible 00:05:03], buys and sells zones, but basically more than likely a bullish trend is going to form here.
Joshua Martinez: Now, here’s the biggest thing, it’s probably one of the simplest things that you can do, but the most effective things that you can do, and it’s often overlooked by many new traders, especially because they just don’t know. One of the things that you’re going to have to make a decision in your trading career is if you believe this or not. Number one, do you believe that this market does the same things around the same price points? What I mean by that is, do you believe this is a pattern driven market or highs and lows happen at, on, around the same price point?
Joshua Martinez: For example, my belief to that is yes, because you have structure, U-turn, U-turn, U-turn, U-turn, you have this up channel which brings structure, which means the market’s U-turning at, on and around same price points, the same angles. Or do you believe number two, which is this market’s completely random. There’s no structure whatsoever and it’s just guessing and gambling. If you believe, or if you’re a person number two, and you just believe this is gambling, and there’s no structure at all period, and it’s just close your eyes and pick a side, you’re going to really not like any of the stuff that I’m showing. But if you believe that the market is structured, than a lot of this is going to make logical sense.
Joshua Martinez: Now, a simple thing that you can do is what’s called looking left. Looking left is basically means throw a line, a horizontal line on the price point that we’re on right now. Just go back in time and see does the market U-turn. Let me ask you this question Josh. Does the market form lows or highs at, on and around the price point that we’re touching now?
Josh: Yes.
Joshua Martinez: If you want to buy this market and you want to buy this market from the bottom level to the top level, should you buy the market below that pink line while we’re hitting it or should you wait for the market to close above the pink line and then really take the rest of the writeup?
Josh: I would wait until it closes
Joshua Martinez: Why would you do that?
Josh: Just because it’s uncertain based off of this line, it could either go both ways, up or down.
Joshua Martinez: Well, so traditionally when the market’s hitting a U-turn level, you can see the market formed a low, went up, formed a low, went up, formed a high, went down. There is an opportunity for this market to fall. There really is. It could be a short-term dip. It could fall right back to the uptrend line and then rally back up. We don’t know that.
Joshua Martinez: To increase our probabilities of being successful and being right, it will be a very smart idea to wait for the market to close above that pink line, which is realistically 3211. As long as we close above 3211, then this market should clear resistance and it should rally bullish the top of the level, which will be the top side, giving us a 300 plus tick buying opportunity, minimum, which an e-mini contract is about 1,500 US dollars. Realistically, you could get that this week.
Joshua Martinez: Hey everyone, this is Josh Martinez. That’s this week’s idea. Once again, S and P 500, [inaudible 00:07:57] up channel, we are hitting some resistance. We just want the market close above there and then we can look for another 300 tick push and I’ll see you next week.
