An Exhaust at HTP S/R

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Joined: Thu Oct 09, 2008 7:31 am

An Exhaust at HTP S/R

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I have recently been delving into the Drummond tools again to deepen my understanding and try to find some success trading with it. Several times when we have spoken, you have mentioned the exhaust at HTP S/R as being one high probability trade. Examples as I understand that might be 11/20 and 12/10 on the daily SPY, when weekly and monthly support existed to create the move away from the exhaust. If I am wrong here, please tell me.

For practice and lower risk per trade, I have been following intraday charts and I have had some limited success. In the process of observing many days of market action, it occurs to me that the odds favor taking trades only in the PL Dot direction, i.e. the direction that the PL Dot is currently moving. I have even written a PL Dot indicator that changes color based on whether the dot is higher or lower than the prior dot. Do you have any thoughts on this?

My confusion lately has come from observing the dots moving toward a possible dotted line setup at an exhaust. One frame of reference says to trade with the dot direction until that fails (follow the trend). Another says the exhaust trade is a precursor to a reversal and waiting for it to be clearly reversing is to be late. Sometimes one is right, sometimes the other. I am not able to tell the difference from the HTP.

Today in XLNX, we were in weekly support, but daily and 78 min. resistance. The 13 min. refused to form a c-wave down, despite multiple exhaust setups. All the HTP resistance proved to be weak after showing recent signs of strength. How would you handle this?

Perhaps another way of asking is when is it an exhaust setup and when is it fighting the trend?

If the high probability target for an exhaust is the PL Dot refresh, then maybe there is a limit to the viability of that trade in terms of time frame. For ex., lower than 1 hr bars are not worth trading because the potential is too small and the move too fast. Would you agree?

Thanks for your help. I feel that I am really close to success, if I can get this one area mastered.

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Re: An Exhaust at HTP S/R

Post by pldot »

Shortest possible answer is that it depends on what the HTP is DOING and that determines which HTP lines are "significant" and thus "strong".
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