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Greg Capra Sponsored by Mastertrader Live Live Presentation Presentation Starts Starts at at 3:30 3:30
Greg Capra Sponsored by Mastertrader Live Live Presentation Presentation Starts Starts at at 3:30 3:30

Greg Capra

Sponsored by Mastertrader

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DISCLAIMER: Futures and options trading are speculative and involve risk of loss. The information in this seminar is taken from sources believed to be reliable. It is intended for information and education only and is not guaranteed by the CBOT as to accuracy, completeness, nor any trading result. It is not intended as investment advice, nor does CBOT endorse or support any product or service represented in the presentation. The views and opinions offered by individuals or their associated firms in interactive seminars are solely those of the authors, and do not necessarily represent the views of the Chicago Board of Trade. The Rules & Regulations of the CBOT remain the authoritative source on all current contract specifications & regulations. "Dow Jones," "The Dow," "Dow Jones Industrial Average," and "DJIA" are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by the Board of Trade of the City of Chicago (CBOT). The CBOT's futures and futures-options contracts based on the Dow Jones Industrial Average are not sponsored, endorsed, sold, or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of trading in such products. Information provided is taken from sources believed to be reliable but is not guaranteed as to its accuracy or completeness. The Rules and Regulations of the Chicago Board of Trade should be consulted as the authoritative source for information, rules, and contract specifications.

An Introduction To Trading the mini DOW with the Pristine Method® PRESENTED BY GREG CAPRA
An Introduction To Trading the mini
DOW with the Pristine Method®
PRESENTED BY GREG CAPRA
PRESIDENT AND CEO OF PRISTINE CAPITAL HOLDINGS
WWW.PRISTINE.COM
www.pristine.comwww.pristine.com
DisclaimerDisclaimer It should not be assumed that the methods, techniques, or indicators presented in this
DisclaimerDisclaimer
It should not be assumed that the methods, techniques, or indicators presented in this book and seminar will be
profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in
this book and seminar are for educational purposes only. This is not a solicitation of any order to buy or sell.
“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 IN THIS BOOK and SEMINAR HAVE NOT ACTUALLY BEEN
EXECUTED, THE RESULTS WE STATE 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 SIMILAR TO THOSE SHOWN.”
The authors and publisher assume no responsibilities for actions taken by readers. The authors and publisher are not
providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any
suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. All
readers and seminar attendees assume all risk, including but not limited to the risk of trading losses.
Day Trading can result in large losses and may not be an activity suitable for everyone.
Copyright © 1994-2007 by Pristine Capital Holdings, Inc. All rights reserved. Printed in the United States of America.
Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or
distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of
the publisher.
3
Combining Support and Resistance, Market Internals, Trends and Price Patterns for high probability trades. Sponsored
Combining Support and Resistance,
Market Internals, Trends and Price
Patterns for high probability trades.
Sponsored by The Chicago Board of Trade and
MasterTrader.com
4
TREND TRADE PLAN The Plan for trading the mini-sized Dow (YM) Define the “reference points”
TREND TRADE PLAN
The Plan for trading the mini-sized Dow (YM)
Define the “reference points” of support and resistance or, more
importantly the lack thereof.
Define the market environment each day with market internals.
Define the current trend or lack thereof.
Trade when a predefined price pattern forms in alignment with
the above.
Money Management
5
SUPPORT and RESISTANCE Actual Support and Resistance Prior price highs and lows, e.g., pivots A
SUPPORT and RESISTANCE
Actual Support and Resistance
Prior price highs and lows, e.g., pivots
A series of price bars, e.g., a base
An unfilled gap between price bars
Subjective Support and Resistance
Fib Retracements-Extensions
Trading Bands or Envelopes
Moving Averages
These analysis tools are used by many to
locate or predict support or resistance.
The only real support or resistance is
price. This the key to objective analysis.
Trendlines
Pristine Capital Holdings, Inc.
6
SUPPORT and RESISTANCE Price support and resistance reference points tell us where others are likely
SUPPORT and RESISTANCE
Price support and resistance reference points tell us where
others are likely to act (buy-sell) or react (take stops).
When those points are far apart, the odds are that prices
will trend toward those points when internals are supporting.
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SUPPORT and RESISTANCE When price support (demand) and resistance (supply) are in a range, trend
SUPPORT and RESISTANCE
When price support
(demand) and resistance
(supply) are in a range,
trend trading does not work.
Breakout failures
have “shock value”
that overcome demand
Void
Distance
Void
Prior support, as well as market internals, guide us to the
odds of potential trend reversals. Most trends end once they
become climactic based on emotional extremes.
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SUPPORT and RESISTANCE Retracement levels, moving averages, and/or trendlines did not stop this move lower.
SUPPORT and RESISTANCE
Retracement levels, moving averages,
and/or trendlines did not stop this move lower.
Trends like this one occur when there
are few price reference points of support
with market internals in alignment.
The distance to those points and there
size will indicate their potency as support.
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Why Use Market Internals Market Internals provide an objective comparison between the current market environment
Why Use Market Internals
Market Internals provide an objective comparison between the
current market environment and past based on historical references.
Market Internals act as “gauges” to determine the broader
market’s current level of strength, weakness and sentiment.
Market Internal readings should be read in combination with
each other. One internal gauge alone may be misleading.
Market Internals guide our bias – Bullish – Bearish – Neutral.
This stops us from projecting our own bias that may be influenced
by our wishes, fear or greed at the moment.
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Market Internals Intra-day Internals End-of-day Internals NYSE TICK McClellan Oscillator Equity Put/Call Ratio NYSE
Market Internals
Intra-day Internals
End-of-day Internals
NYSE TICK
McClellan Oscillator
Equity Put/Call Ratio
NYSE TRIN
Advancing Stocks Ratio
Total Put/Call Ratio
NYSE Advance-Decline Line
Advancing Volume Ratio
OEX Put/Call Ratio
NYSE Advance-Decline
Volume
VIX and VIX Oscillator
Sentiment Surveys
5-MA of the NYSE TRIN
NYSE VIX
10-MA of the NYSE TRIN
DOW TIKI
Closing NYSE TRIN
Buy and Sell programs
Closing DOW TICKI
Total Put/Call Ratio
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THE TICK TICK Guidelines: The TICK is used to determine very short-term changes in market
THE TICK
TICK Guidelines:
The TICK is used to determine very short-term changes in market momentum.
Trading ranges above 0 indicate a Bullish Bias.
Trading ranges below 0 indicate a Bearish Bias.
Extreme TICK readings (+ 1000, - 1000) suggest a short-term turn, but
consistent readings between + 600 and + 1000 are very bullish, and vice versa.
Divergences, or a non-conformation of price highs or lows, and TICK highs and
lows, indicate relative strength or weakness, signaling a potential trend change.
Confirmation of price highs or lows by TICK highs or lows suggests continuation.
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NYSE TICK TICK spending time between +, - 600 is neutral. This is a scalper’s
NYSE TICK
TICK spending time between +, - 600 is neutral.
This is a scalper’s market!
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NYSE TICK New high and extreme! Breakouts in YM should go higher after a pullback!
NYSE TICK
New high and extreme!
Breakouts in YM should go
higher after a pullback!
TICK staying well above zero and
moving to extremes, very bullish.
TICK Support
TICK often stays at a high level when
prices trend higher.
Trend traders should use this as a guide
to hold onto longs.
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NYSE TICK Resistance at extremes. Don’t sell or sell short based on this information alone!
NYSE TICK
Resistance at extremes. Don’t sell or sell short based on this information alone!
TICK spending most of the time above zero
and between + 600 and + 1000, very bullish.
Support
When the TICK pulls back, ideally near the
zero line, consider longs.
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NYSE TICK TICK spends most time below zero, bearish. Lower Highs HHs HLs LLs Below
NYSE TICK
TICK spends most time below zero, bearish.
Lower Highs
HHs
HLs
LLs
Below -600 to -1000, very bearish.
While bounces do occur from
-1000, avoid longs, unless climactic.
HH-HL TICK, environment changing
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YM & NYSE TICK TICK extremes can indicate a bottom, as well as confirm an
YM & NYSE TICK
TICK extremes can indicate a bottom, as well as
confirm an upward move.
While Tick extremes suggest a stall in an uptrend,
trends typically do not end until prices reach a point
of price resistance.
Stars show bullish price-tick action.
TICK divergences can lead a turn in
YM, but the most reliable signals will
come when prices are also in an area
of price support or resistance.
TICK Support
Bullish Divergence
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THE TRIN TRIN Guidelines: Readings above 1.00 indicates more volume is associated with declining stocks.
THE TRIN
TRIN Guidelines:
Readings above 1.00 indicates more volume is associated with declining stocks.
Readings below 1.00 indicate more volume is associated with advancing stocks.
The TRIN’s trend is as important as the current value.
A TRIN rising from 1.2 towards 2.0 indicates a more bearish market than one
rising from .55 to 1.0. Declining from 1.2 to .50 is a more bullish environment than
one declining from 2.3 towards 1.5.
A sideways TRIN is associated with its level.
While a Rising trend is Bearish and a Declining trend is Bullish. This guide
alone can be incomplete; therefore, a deeper understanding of the TRIN is needed.
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NYSE TRIN YM’s range contracts once YM and TRIN are in sync. Sideways, TRIN rising.
NYSE TRIN
YM’s range contracts once
YM and TRIN are in sync.
Sideways, TRIN rising.
Note wide range bars
Range expands after YM
is rising for two hours!
TRIN does not always trend opposite YM
Below 1,
but rising
YM Rising, TRIN falling
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NYSE TRIN This chart tells us that the market can rise while the TRIN is
NYSE TRIN
This chart tells us that the
market can rise while the
TRIN is rising, so there must
be more to this indicator.
TRIN is below 1, so
bullish, but rising
bearish. Volume is
increasing into
decliners.
TRIN below 1 and flat to declining.
Bullish, but this does not truly give a
complete picture of the environment.
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THE TRIN TRIN is an excellent market internal indicator, but can be misleading at times,
THE TRIN
TRIN is an excellent market internal indicator,
but can be misleading at times, if you don’t know
how to interpret it.
By viewing the TRIN’s components, it provides
a deeper understanding of the TRIN and its use.
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THE TRIN How is it calculated? (Advancing Stocks / Declining Stocks) / (Advancing Volume /
THE TRIN
How is it calculated?
(Advancing Stocks / Declining Stocks) / (Advancing Volume / Declining Volume)
Advancing Stocks - 1715 /
Advancing Volume - 1222310 /
+ 1187
+ 48416
Declining Stocks -
528
Declining Volume -
738894
3.25
Divided by
1.654
Equals a 1.97 TRIN
Although this TRIN indicates a bearish environment, this TRIN
value alone is misleading. The numbers calculated are not bearish.
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THE TRIN How is it calculated? (Advancing Stocks / Declining Stocks) / (Advancing Volume /
THE TRIN
How is it calculated?
(Advancing Stocks / Declining Stocks) / (Advancing Volume / Declining Volume)
Advancing Volume - 1222310 /
Advancing Stocks - 576 /
- 632810
-1081
Declining Volume - 1855120
Decliners Stocks - 1657
.349
Divided by
.659
Equals a .53 TRIN
Although this TRIN indicates a bullish environment, this TRIN
value alone is misleading. The calculated numbers are not bullish.
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ADVANCE – DECLINE LINE The Advance – Decline line measures the number of stocks that
ADVANCE – DECLINE LINE
The Advance – Decline line measures the number of
stocks that are advancing verses declining. When more are
advancing, the lines rises; more declining, the line falls.
The A-D line does not consider how much each stock has
moved or how much volume is associated with advancers or
decliners, so its information is not complete.
That said, the advance - decline line, when added to other
market internals, does provide a complete picture of what is
occurring in the market.
24
ADVANCE – DECLINE LINE General A-D Line Guidelines: A rising A-D line indicates the number
ADVANCE – DECLINE LINE
General A-D Line Guidelines:
A rising A-D line indicates the number stocks advancing vs. declining is increasing
A declining A-D line indicates the number stocks declining vs. advancing is increasing
An A-D line between + / - 500 is neutral, but follow its trend
The higher an A-D line rises, the more bullish. Values above + 500 are decisive
The lower an A-D line falls, the more bearish. Values below - 500 are decisive
Readings of + or - 1000 and greater are ideal for a trend to continue
25
ADVANCE – DECLINE LINE Set horizontal lines at every 500 increments Flat at neutral level
ADVANCE – DECLINE LINE
Set horizontal lines at every 500 increments
Flat at neutral level means
the market is choppy. Good for
scalpers, but not trend traders.
Now the market is getting
ugly. Don’t fight the trend!
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ADVANCE – DECLINE LINE Although the A-D is still at a negative level, it is
ADVANCE – DECLINE LINE
Although the A-D is still at a
negative level, it is improving.
Although this was at a very bearish level,
the trend turned up. Now look at the TICK
to see if it moved to a more bullish level.
Market environments change!
27
ADVANCE – DECLINE LINE The trend is up and the level is bullish, don’t short.
ADVANCE – DECLINE LINE
The trend is up and the level is
bullish, don’t short. Hold those longs.
It’s very likely that the TICK was
hitting high extremes (+1000).
That’s bullish with this A-D Line,
and not a reason to exit long positions.
28
ADVANCING – DECLINING VOLUME Advancing volume is the volume in stocks trading above yesterday’s close.
ADVANCING – DECLINING VOLUME
Advancing volume is the volume in stocks trading above
yesterday’s close. Declining Volume is the volume in stocks
trading below yesterday’s close.
The Advance – Decline Volume Line measures the
advancing volume minus declining. When more is
advancing, the lines rises; more declining, the line falls.
When the A-D Volume Line is added to other market
internals, it provides a complete picture of what is occurring
in the market.
29
ADVANCING – DECLINING VOLUME General A-D Volume Guidelines: A rising A-D Volume line indicates advancing
ADVANCING – DECLINING VOLUME
General A-D Volume Guidelines:
A rising A-D Volume line indicates advancing vol. vs. declining vol. is increasing
A declining A-D Vol. line indicates advancing vol. vs. declining vol. is decreasing
An A-D Vol. line near the 0 area or + / - 150000k is neutral
An A-D vol. value above + 200000k and rising is decisively bullish
An A-D vol. value below – 200000k and declining is decisively bearish
Readings greater than + or – 200000k, and trending are ideal for a trend to continue
30
ADVANCING – DECLINING VOLUME Sideways at a bullish level. Maintain a bullish bias, but be
ADVANCING – DECLINING VOLUME
Sideways at a bullish level.
Maintain a bullish bias, but be open to change
if internals and YM’s trend suggest change.
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Rising rapidly at very bullish levels
ADVANCING – DECLINING VOLUME Bearish, but at a neutral level. Check other internal gauges for
ADVANCING – DECLINING VOLUME
Bearish, but at a neutral level.
Check other internal gauges for guidance.
A-D Volume is declining and
declining rapidly to lower levels.
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ADVANCING – DECLINING VOLUME Check other internals for guidance A-D Volume is rising, but rising
ADVANCING – DECLINING VOLUME
Check other internals for guidance
A-D Volume is rising, but rising slowly at
neutral levels. This indicates a slightly bullish
market, but not a decisive one.
33
COMBINING MARKET INTERNALS Conflict Agreement A-D Volume NYSE TRIN NYSE TICK A-D Line 34
COMBINING MARKET INTERNALS
Conflict
Agreement
A-D Volume
NYSE TRIN
NYSE TICK
A-D Line
34
COMBINING MARKET INTERNALS Conflict Agreement A-D Volume NYSE TRIN NYSE TICK A-D Line 35
COMBINING MARKET INTERNALS
Conflict
Agreement
A-D Volume
NYSE TRIN
NYSE TICK
A-D Line
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COMBINING MARKET INTERNALS Bullish Market Environment Bearish Market Environment Neutral Market Environment TICKS 0 to
COMBINING MARKET INTERNALS
Bullish Market Environment
Bearish Market Environment
Neutral Market Environment
TICKS 0 to +1000 with many
ticks + 600 to + 1000 are key
TICKS 0 to -1000 with many
ticks - 600 to - 1000 are key
TICKS between - 600 to + 600,
or oscillating in that area.
TRIN declining, ideally below
1.0, or sideways below .50
TRIN rising, ideally above
1.0, or sideways above 1.2
TRIN sideways, ideally
between .90 to 1.05
A-D line rising, ideally above
+ 500
A-D line falling, ideally below
- 500
A-D line sideways, ideally
between – 500 to + 500
A-D Volume rising, ideally
above + 200000
A-D Volume falling, ideally
below - 200000
A-D Volume sideways, ideally
between - 200000 to + 200000
These are ideal scenarios, and they can and do occur. But realize
that there are many combinations of levels and trends.
Experience will teach how to combine and interpret them.
36
DEFINING a TREND and TREND CHANGES If there is a “Void” of price reference points
DEFINING a TREND and TREND CHANGES
If there is a “Void” of price reference points (support – resistance), the odds are
high that a trend will develop when market internals are supporting.
To take advantage of this, an objective method of trend analysis is needed.
Moving average crossovers, Trendline breaks and/or Fibonacci retracements
are all subjective and potentially misleading as methods of trend analysis.
By simply monitoring pivotal price points, as the market forms them, we can
objectively follow the market’s trend.
This method will also signal trend changes in the time frame being viewed.
37
DEFINING a TREND and TREND CHANGES ? HL All price pivot lows begin with higher
DEFINING a TREND and TREND CHANGES
?
HL
All price pivot lows begin with
higher low (HL) bars adjacent to
both sides of the “pivot bar.”
HL
HL
?
Demand has increased
The next bar will determine if a pivotal
point of significance has formed.
All price pivot highs begin with
lower high (LH) bars adjacent to
both sides of the “pivot bar.”
Supply has increased
?
LH
LH
LH
For a change in trend to occur, a
prior price pivot must be overcome
on a closing basis.
?
It cannot happen any other way!
38
DEFINING a TREND and TREND CHANGES YM never traded above a prior pivot high within
DEFINING a TREND and TREND CHANGES
YM never traded above a prior
pivot high within this trend.
While pivot lows formed (support), a down
trend within a void, with supporting internals,
suggests that they can be overcome.
39
DEFINE A PRICE PATTERN Trading is psychological to a great extent. Let’s use that to
DEFINE A PRICE PATTERN
Trading is psychological to a great extent.
Let’s use that to our advantage through technical analysis.
Price patterns are pictures of psychology in motion.
Have you ever bought a breakout or shorted a breakdown?
Have any of those breakouts or breakdowns ever failed?
How did it make you feel, think and what did you do?
40
DEFINE A PRICE PATTERN Breakout Failure Breakout Failure A breakout failure catches buyers on the
DEFINE A PRICE PATTERN
Breakout Failure
Breakout Failure
A breakout failure catches buyers on
the wrong side of the prevailing trend.
This typically results in a continuation
of the trend soon afterward.
Short under the failure bar’s low, stop 2
ticks above its high.
41 41
TREND and all INTERNALS in AGREEMENT Vol. Line is bullish TRIN is bullish Breakout Failures
TREND and all INTERNALS in AGREEMENT
Vol. Line is bullish
TRIN is bullish
Breakout Failures are
not taken.
The trend and internals
are bullish.
A-D Line is bullish
TICK is bullish
Breakdown Failure
signals a buy with bullish
trend and internals.
With all internals in agreement at bullish levels and a bullish
trend, the odds are high that the breakdown failure pattern will
result in a continuation of the prevailing bullish trend.
42
FINAL THOUGHTS Price patterns are pictures of the thoughts, expectations and emotions of the traders
FINAL THOUGHTS
Price patterns are pictures of the thoughts, expectations and emotions of the
traders that formed them.
When those pictures tell you that others have been caught on the wrong side of
the trend and market internals, you have an opportunity to take advantage of it.
Odds of similar patterns repeating an outcome in exactly the same way are low.
That said, pattern recognition does suggest a similar outcome.
Accept the fact that you do not know what will happen next.
The odds will be on your side, if you have a method of trading that you have
internalized, have confidence in – and, of course, have the discipline to follow.
43
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