Teach Talk Trade Day Trading & Technical Analysis

Commodity Futures 12-19-07 (Wednesday): Occasional thoughts on various futures’ contracts.

LBH (March Lumber): “Lumbering Lower?”

The T8 is the moving average that we use to define trend. The T8 is currently pointing down and we consider the trend to be negative because of the direction of the T8. The opposite holds true for T8’s that are in a uptrends. With a positive trending T8, our preferred moving average, we are constantly monitoring for only long positions. In the case of a negative T8 (currently), we are constantly monitoring for short positions. 

The rules for this set-up are simple: a. take trades (buy/sell) in the direction of the trend b. buy openings below a positive sloping T8  c. sell openings above a negatively sloping T8  d.  intraday: buy or sell retracements to the T8 (in the direction of the trend).

This simple set of rules has triggered four trades, in March lumber, during the past three weeks of trading. On three occasions, the price has opened below a negative sloping T8 and during the session, price has rallied to touch the T8.  On one occasion, lumber has opened higher than the negatively pointed T8.   Simply stated: sell touches of a negatively pointed T8. or take any openings above or below a T8 (making sure that you always trade in the direction of the T8).   The first retracement is always the most important and offers the largest potential return.

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