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Major Completed Patterns with Ongoing Trends Trends based on the completion of major chart patterns are ongoing in USD/CHF, Corn, and COW (ETF). A major pattern was negated in Sugar. A major pattern was completed and negated in Soybeans. A major pattern was completed and the target was quickly met in Crude Oil. I will comment on the Crude Oil chart because an opportunity exists to repurchase to reenter the market.
Pattern(s) 14-week continuation inverted H&S
Date completed 1/13 at 6.45
Commentary I was prematurely stopped out of Corn during the huge break on Wednesday, but at the risk of being whipsawed I reclaimed my long position on the close realizing the break was only a retest of the neckline of the underlying H&S bottom. The target of 7.48 should be met within the next week or two. The Factor is long.
Market USD/CHF (spot)
2/23 at .9294 .8881 Commentary The decline on Feb. 23 completed an 8-week continuation rectangle or flag pattern on the daily chart. This pattern has a target of .8881. The market is over-sold short term, and some retesting of the rectangle is quite possible. The weekly chart has a target of .8100. Factor is short.
Pattern(s) 28-month descending triangle on weekly chart 8-week rectangle
Completion date 9/22 at .9862
Market Pattern(s) Date completed Target(s) COW (etf) 10-month rectangle 1/27 at 31.19 34.11 and 36.50 Commentary The market remains in a trading range above the iceline. The trade should work as long as the Feb. low is not decisively penetrated. The daily chart displays the stop movement from the Last Day Rule (30.82) to the Retest low (31.15). The Factor is long in an IRA account.
Minor Completed Patterns with Ongoing Trends None Major Patterns Under Construction
Market Pattern(s) Required for Completion Target(s) USD/JPY Commentary There is one scenario I should mention in this forex pair. Numerous times in the past months and years I have shown the monthly chart, which in October 2008 confirmed a 12-year descending triangle. This pattern has a target of 60.00. The monthly chart also shows a possible 21-month running wedge. I have been jerked around in this market as prices have been indecisive at the lower boundary of this wedge, flashing false signals on both sides of the market. The daily chart now displays an enlarged version of a symmetrical triangle, as shown on the lower chart. I will have no choice but to exercise the discipline of taking a short line if the lower boundary and the February low are penetrated. The Factor is flat.
Market Pattern(s) Required for Completion Target(s) Crude Oil 11-week broadening pattern Completed on 2/22 101.80 met on 2/24 Commentary Crude Oil provided as much excitement as a person can handle this past week, rallying 1300 points from the close one week earlier. I was fortunate enough to buy the retest on Feb. 23 and take profits on Feb. 24. Why is it that a trader never owns enough of the really good trades and too much of the bad trades? I have an interest in buying a retest of the 95.00 to 96.00 cents if given the opportunity early next week. Developments in the Mid East should keep the market from breaking too much in the near future. While the target of 101.80 has been met, a further advance toward 108.00 is possible. The Factor is flat, wishing I had bought the retest on Feb. 25.
Minor Patterns Under Construction None
Trading Principles of The Factor The Factor’s approach to market speculation is based on the following: • The overriding philosophy that the primary purpose of capital markets is to redistribute wealth from the many to the few. • The belief – at least for me – that day trading is a loser’s game. • The experience that trades decided upon at a moment in time during active market hours have contributed negatively to the historical net bottom line. • “No question about it” classical chart formations of at least 10 to 12 weeks in duration identified primarily on weekly charts – with entries and exits that hopefully will make sense when viewed on a chart a year after the fact. • The philosophy that it is better to miss a trade all together than to be obsessed about being in a trade. • Little or no tolerance with breakouts that are not decisive or that put a trade into the red; Agonizing patience with trades that remain in the black – giving a trade plenty of leeway to reach its target. • A persistent search for the 20 or so best examples of classical charting principles each year, with the goal of successfully trading the majority of these market situations. • The acceptance that there will be losing trades, losing weeks, losing months, and very unfortunately, even losing years. • The realization that most chart patterns, especially those of shorter duration (less than 8 to 10 weeks), completely fail or morph into part of a larger chart construction. • A philosophy that being profitable over an extended period of time is far more important than being right on the next trade or series of trading events – that consistently following a sound trading plan is not measured by the results of any given trade or series of trades. • An emphasis on sound (in fact, ruthless) risk management protocols with the faith that preserving trading assets is a prerequisite to be positioned for long-term profitability. A trader’s pile of chips needs to be protected as a first priority. Severe drawdowns are very difficult to overcome. A trader should never be more than one to three fully leveraged good trades away from new capital highs. • An intentional alertness to a few trading events per year that are characterized by multiple technical confirmations (the stars becoming aligned) and a low risk entry point where extraordinary leverage can be employed with only marginally greater risk. • An extreme amount of patience, waiting and waiting for a pattern to become fully mature – and then the discipline to pull the trigger with an appropriate amount of leverage. • A sum of profits or certain rate-of-return is not a legitimate goal in trading. Rather, the goal must be to properly execute clearly understood strategic and tactic maneuvers. Control the controllable, let go of the uncontrollable! • The ability for immediate self-forgiveness when getting off the script, realizing that a focus on past/recent mistakes can lead to a vicious cycle.
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLYCONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING: IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS. IF YOU PURCHASE OR SELL A COMMODITY FUTURE OR SELL A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUESTED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT. UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A “LIMIT MOVE.” THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A “STOP-LOSS” OR “STOP-LIMIT” ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. A “SPREAD” POSITION MAY NOT BE LESS RISKY THAN A SIMPLE “LONG” OR “SHORT” POSITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. THE RISK OF LOSS IN FOREX TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD ALSO BE AWARE OF THE FOLLOWING: FOREX TRANSACTIONS ARE NOT TRADED ON AN EXCHANGE, AND THOSE FUNDS DEPOSITED WITH THE COUNTERPARTY FOR FOREX TRANSACTIONS MAY NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTIONS CONTRACTS. IF THE COUNTERPARTY BECOMES INSOLVENT AND YOU HAVE A CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH THE COUNTERPARTY, YOUR CLAIM MAY NOT RECEIVE A PRIORITY. WITHOUT A PRIORITY, YOU ARE A GENERAL CREDITOR AND YOUR CLAIM WILL BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN CUSTOMER FUNDS THAT THE COUNTERPARTY KEEPS SEPARATE FROM ITS OWN OPERATING FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF OTHER GENERAL AND PRIORITY CREDITORS. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FOREX TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.
2 North Cascade Avenue ● Suite 720 ● Colorado Springs, CO 80903 Telephone: (719) 648-4160 ● Email Factorco@gmail.com
Summary of Major Patterns - 2011
Patterns Identified and Traded in Real Time
Date Completed Price Completed Date Completed Price Completed Initial & Amended* Negation Point (1) Exit by "Initial stop OCO target" (2) Active stop movement Exit condition (see notes) (2) Result per Contract
Long or Short
(1) Result per Unit
Patterns carried over from 2010 - Results marked to the market as of Dec. 31. Results are from Dec. 31 close to close of position. Equity change 12/31/10 to close out.
Gold (mini) USD/CHF Crude Oil (mini) Feb. (roll) Spot Feb. (roll) Long Short 50k 10-month running wedge 28-month descending triangle 22-Sep 22-Sep 1294 0.9862 (Feb) 81.5 1445 0.8101 (Nearby) 96.6 None None Move ↓ 1353* Move ↑ .9787* Move ↓ 87.60* Pattern negated 1/7 at 1353 ($2,257) Closed in 2010 Closed in 2010 Revised LDR negated 1/7 at 8760
3-month H&S failure
Closed in 2010
Osaka Nikkei Mar. (roll) Dow Mpls. Wheat Mar. Soybean Meal Crude Oil (mini) Platinum
Long (2) Long
4+ month H&S bottom 4-month rectangle on daily continuation Possible 29-month rectangle - pending 14-month rectangle 13-week continuation diamond 21-month running wedge recompleted 3-month descending triangle
Target nearly met, stops moved, 1/21 Move ↓ at 10390 10390* Target met 1/26 at Move ↓ 862* 965 445 swing target Move ↓ 378.3* Move ↓ 87.40 Move ↓ 1818* Move ↑ 83.01 Move ↑ 1.0034* Totals** Move ↓ 19.29 Move ↑ 1.3176
(B,D) - 1/20 at 10430 (B,D) - 1/10 at 865 (A,B) - 1/25 at 374.4 Same (A,B) - 1/5 at 1719
Mar. Nearby April
Long Long Long (.5)
20-Dec 21-Dec 27-Dec
355.5 (Feb) 89.25 1741
430 105.7 1898
4+ week triangle
2/11 at 377.9 Pattern negated 1/7 at 87.40 1/20 at 1818 Pattern negated 1/5 at 83.01 Pattern negated 1/31 at 1.0042 2010 trades Pattern negated 1/28 at 19.28 Pattern negated 1/13 at 1.3176 Pattern negated 1/12 at 80.39 Pattern negated 2/23 at 672 Pattern negated 1/17 at 2901 Pattern negated 1/20 at 1444 Pattern negated 2/16 at 1486.5 Pattern negated 2/1 at 82.56
$400 ($2,000) $1,050
$50 ($2,000) ($1,425)
2+ week triangle
USD/JPY USD/CAD Hong Kong Index
Spot Spot EWH (ETF)
Short 80k Short 100k
70.45 0.9011 21.33 & 24.85 1.2612 & 1.2124
4-month H&S bottom failure 29-Dec None
($1,802) ($598) ($2,051) ($460)
Same (A,B) - 1/20 at 9988 (A,B) - 1/25 at 19.47
($1,802) ($61) ($4,387) ($270)
Patterns completed in 2011
Long 1,000 shares 3-month H&S failure 4-Jan 19.74
EUR/USD US$ Index Corn
Spot Mar Mar
Short 70k Long Long
7-week triangle Possible 33-month triangle 14-week continuation H&S Possible 7-week H&S and 5-month trendline violation 10-week coil on daily continuation chart 10-week coil on daily continuation chart secondary completion 17-week rising wedge 10-month rectangle 3-month descending triangle 12-week running wedge 8-week rectangle 13-week rising wedge 15-week symmetrical triangle 12-week broadening 9-week rounding top Pyramid 14-week H&S reentry 28-month descending triangle (pyramid)
6-Jan Early lead 7-Jan 13-Jan
($994) ($950) $1,350
Same Same (B,D) - 2/18 at 698
($994) ($950) $2,650
6-week triangle 6.45 7.48
Move ↓ 80.39 Move ↓ 6.79*
Silver Rough Rice
Short (mini) Long (x2)
Move ↑ 2899 Move ↓ 1444 Move ↓ 1489* Move ↑ 82.52* Move ↓ 30.98* Move ↑ .9905* Move ↓ 31.03 Move ↑ 119-26* Move ↑ 28.53* Move ↓ 82.31* Move ↓ 93.20
Same Same (B,D) - at 2/15 at 1558 (A,B) - 1/24 at 82.34
Rough Rice AUD/JPY Livestock USDCAD Sugar T-Bonds Sugar USDJPY Crude Oil (mini) Soybeans Sugar Corn USDCHF
Mar Spot COW (ETF) Spot May Mar May (roll) Spot April May May May Spot
Long Short 70k Long 900 shares Short 60k Long Short Short Long 70K Long (.5) Short (.5) Short Long (.5) Short 60k
20-Jan 20-Jan 27-Jan 1-Feb 3-Feb 4-Feb 8-Feb 10-Feb 22-Feb 22-Feb 23-Feb 23-Feb 23-Feb
1470.5 81.61 31.19 0.9906 32.01 118-31 29.31 83.31 95.325 1357
1695 78.21 34.11 & 36.50 0.9011 38.59 116-09 23.21 87.6 101.95 1273 7-day flag 23-Feb 23-Feb 27.97 702 23.21 754 0.8881 8-day triangle 20-Jan 81.61 80.3
Pattern negated 2/22 at .9911 Pattern negated 2/3 at 30.93 Pattern negated 2/21 at 119-26 Pattern negated 2/25 at 28.61 Pattern negated 1/24 at 82.24 Target met 2/24 at 101.95 Pattern negated Move ↑ 1398 2/25 at 1398 Move ↑ Pattern negated 28.53 2/25 at 28.61 Move ↓ 6.67 Move ↑ .9392
($31) ($1,210) ($844) $784 ($911) $1,656 ($1,025) ($717)
(A,B) - 2/22 at .9911 Same (A,B) - 2/16 at 119-20 Same (A,B) - 2/22 at 82.94 Same Same Same
($31) ($1,210) ($656) $784 ($313) $1,656 ($1,025) ($717)
Reversal 8-week rectangle
2011 trades 2010/2011
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
Notes: *Amended protective stop level Size of forex trade and number of futures contracts are based on trading units of $100,000 to $120,000 In spot forex trades, Factor generally assumes a leveraged position sized so that the risk from entry to the initial protective stop does not exceed $1,000 per $100,000 to $120,000 of trading capital. Patterns in grey not technically long enough to qualify as a Best Dressed List trade Two hypothetical trade management schemes are used by Factor LLC for tracking signals launched from major chart patterns. (1) OCO trade management rules. Trade remains open until initial stop is hit or until the target is reached. A. Intial stop is hit, negating the pattern. This stop may be amended in the direction of a profitable trade. B. Target is reached. (2) Active trade management rules. In addition to (1) above, trade is exited if two of four events occur, as follows. A. The chart pattern fails to launch and falters. Initial stops are moved in response; B. The Trailing Stop Rule is activated; C. A trend-following moving average program used by Factor indicates a trend change; D. A recognizable chart pattern develops and is completed indicating a trend change.
Factor LLC may or may not have caught these signals in real time, and may or may not have traded the signals in the exact leverage proportion as listed in the results column. Thus, the results of these signals should be considered as hypothetical and are subject to all of the limitations of hypothetical results. The CFTC requires that hypothetical results be accompanied by the disclaimer statement below.
**HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.