Linda Raschke Grail Class

Linda Bradford Raschke - LBR Group

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Class (10/13/20 (10/13/2004) 04)

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@chris [16:13:30 [16:13:30]> ]> ALERT : lets rock and rolll gang @chris [16:13:43 [16:13:43]> ]> http://snipurl.com/494o @chris [16:13:51 [16:13:51]> ]> that that is the Link where i will post charts @chris [16:14:10 [16:14:10]> ]> I I will say REFRESH to refresh the link to see the next chart. @chris [16:14:28 [16:14:28]> ]> right right now, we should all see 1 chart posted @chris [16:15:14 [16:15:14]> ]> Welcome Welcome traders to our Wednesday Wednesday Training Class, 2 weeks ago we discussed the 3/10 Oscillator, the various ways to look at this indicator, divergences, pullbacks, 3 pushes among the different ways to use it. @chris [16:15:27 [16:15:27]> ]> I I am going to stick to the basic LBR methods from our trade setup library tonight. @chris [16:15:53 [16:15:53]> ]> One One of my favorite patterns is the Holy the Holy Grail and another is the First Cross Trade. @chris [16:16:09 [16:16:09]> ]> The The goal for us at LBR is for ALL of you to understand what we do during the day, the comments, the lingo, the trade ideas @chris [16:16:22 [16:16:22]> ]> , , what to look for, and although many of you understand this stuff already, there are m embers now and members that will come to our site in the future that will need to learn this information @chris [16:16:36 [16:16:36]> ]> , , so, I felt it best to get detailed about these patterns so so that the members who are not fully understanding them, will walk away tonight knowing what they are and how to use them. @chris [16:16:59 [16:16:59]> ]> We We will discuss discuss the Holy Grail Trade; I will show you what I look for in my work to find trade ideas. We will save the First Cross for another another session. @chris [16:17:20 [16:17:20]> ]> Lets Lets discuss the Holy Grail; this pattern was in Linda's "Street Smarts" book.. @chris [16:17:29 [16:17:29]> ]> This This is an Excerpt from the book. @chris [16:17:45 [16:17:45]> ]> "Based "Based on Welles Wilder's ADX ( Average Directional Index ) this strategy works in any market in any time frame. @chris [16:18:03 [16:18:03]> ]> Before Before we continue, continue, you need to be familiar with the ADX. Simply stated, the ADX measures the strength of a trend over a period of time. @chris [16:18:18 [16:18:18]> ]> The The stronger the trend in either direction, the higher the ADX reading. @chris [16:18:36 [16:18:36]> ]> When When price make new highs (lows) in a strong trend, you should always buy ( sell ) the first pullback. @chris [16:18:55 [16:18:55]> ]> The The Holy Grail is a precise method we use to measure measure when to enter a position after a retracement. Once we are in this trade, we are looking for continuation of the previous trend. @chris [16:19:07 [16:19:07]> ]> The The reason I am posting this from the book is so that we @chris [16:19:31 [16:19:31]> ]> all all are on the same page, I felt was no better explaination than the the one that Linda gave in the book, obviously !, But @chris [16:19:37 [16:19:37]> ]> we we also will discuss some @chris [16:19:50 [16:19:50]> ]> additional additional ideas that will add to this as we go foreward @chris [16:20:02 [16:20:02]> ]> I I will continue with the info from the book @chris [16:20:11 [16:20:11]> ]> One One of two outcomes typically follows. The retest will e ither fail at the previous high/low in which case a small profit can be made. In the second scenario, a whole new continuation continuation leg begins. begins. At the very least, one is offered a v ery low risk entry point with several options for managing managing the exit thereafter. " @chris [16:20:30 [16:20:30]> ]> FOR FOR BUYS (SELLS ARE REVERSED) R EVERSED) @chris [16:20:41 [16:20:41]> ]> A A 14 period ADX must initially be greater than 30 and rising. This will identify a strongly trending market @chris [16:20:57 [16:20:57]> ]> Look Look for a retracement in price to the 20 period ex ponential ponential moving average. Usually the price retracement will be accompanied accompanied by a turndown turndown in the ADX @chris [16:21:07 [16:21:07]> ]> 1. 1. When the price touches the 20 period exponential moving average, put a buy stop above the high of the previous bar. @chris [16:21:18 [16:21:18]> ]> Once Once filled, enter a protective sell stop at the newly formed swing low. Trail the stop as profits accrue and look to exit at the most recent swing high @chris [16:21:29 [16:21:29]> ]> 1. 1. . I f you think think the market m ay continue continue its move, you might exit part of the position at the most recent swing high and tighten stops on the balance. @chris [16:21:42 [16:21:42]> ]> if if stopped out, re-enter this trade by placing a new buy stop at the original entry price. @chris [16:21:52 [16:21:52]> ]> 1. 1. After a successful trade, the ADX must once again turn UP above 30 before another retracement to the moving average can be traded. @chris [16:21:55 [16:21:55]> ]> Also, Also, @chris [16:22:17 [16:22:17]> ]> We We want to see the 3/10 make new momentum highs, and I will discuss this further.



@chris [16:22:41]> Another pattern that goes hand and hand with the Holy Grail is the First Cross Pattern, at least for me it does, sometimes one will trigger an entry whereas the other pattern has not, and sometimes we see both of them triggering trades. @chris [16:22:57]> We discussed the 3/10 Oscillator in our training session 2 weeks ago, so those that are still not familiar with this Oscillator, please refer back to the class we conducted for more information on this. @chris [16:23:29]> Since I did this work lastnight, I am cutting and pasting for you to expedtite the training @chris [16:23:46]> if you are falling behind, take your time to read, no rush, we will also post @chris [16:23:55]> this class to the site over the next 1-2 days @chris [16:24:13]> Important to know that the 3/10 must also make new momentum highs with the Rising ADX in order to have a quality Holy Grail Trade @chris [16:24:33]> , stocks that have divergences, meaning, as price is rising and the 3/10 is making lower highs, would still lead to a grail trade, but the risk is high and you would need to proceed with caution. @chris [16:24:43]> I have Examples showing both New Momentum high that had grails and also trades that where from a divergence in the 3/10. @chris [16:25:04]> I have a group of various examples to share with you to help you start to identify these patterns, now, as Linda said in her book, any market, any time frame, the beauty of this pattern @chris [16:25:18]> Generally we like to see price pullback down to the moving average, now, that is up to the individual trader, if you are within reason of the 20 ema , and you want to start putting on a partial position to build a trade @chris [16:25:33]> , that's fine, there is no wrong way, we are all fully aware of the risk in putting trades on way to early as well as not getting a trade on that was a big winner, so, depending on the market @chris [16:25:50]> , depending on the time frame and also depending on your account size and what your commitment is to a particular trade, you would have to determine that for your own account.



@chris [16:26:33]> The first example is S&P from last week, we had an hourly grail buy on a pullback down to the moving average after this market rallies nearly 40 points off the lows @chris [16:26:49]> . This pattern did get a full retest up, and as I recall, there was price divergences within the various indexes, the DOW did not make its full retest up, and the market reversed after achieving its target @chris [16:27:06]> . I highlighted the Rising ADX above 30, the 20 ema pullback area, and the retest level, also notice the 3/10 made new momentum highs.



@chris [16:28:15]> In the next Example, we have a 60 min chart of the S&P, the ADX was rising, but also had a sell divergence from the 3/10 as it made lower high to the price on the rally @chris [16:28:37]> , eventually price had a pullback down to the 20 ema, it held as support and this market had a retest of the prior swing, achieving its target for the Holy Grail Trade. This type of trade, although did work out, held more risk that the first example I posted.



@chris [16:29:30]> This next example, is a daily chart of ADI, can see the ADX was rising as this market was selling off, the 3/10 made new momentum lows also, then, spiked UP off the lows and rallied right to its 20 ema where it found resistance @chris [16:30:05]> , price turned back down and put in a higher low, sometimes you do not get a full retest down, and that's the nature of the beast as my dad used to say, but this chart had over a 4 point swing back down.



@chris [16:30:45]> The next example is BSC, this stock went to new all time highs, 3/10 also made new highs, then pulled back down not only to the 20 ema on the daily, but to the prior swing high @ 91.76, and had a bounce above 93.00 @chris [16:31:14]> from the first bounce the day it hit its 20 ema, sometimes your looking for 1 trade, maybe a day trade and even though this is a daily chart, nothing wrong with taking a short term trade off larger time frame support.



@chris [16:31:52]> Oil Shares have been kings, back 2 months ago, AHC, had a rising ADX, new momentum highs on the 3/10 also…. @chris [16:32:03]> several of the shares in this group pulled back down to the weekly 20 ema, this stock did not quite make it back down to its 20 ema, @chris [16:32:16]> and this is a good example of waiting for the exact test of the ema only to miss a huge move, again @chris [16:32:26]> , depends on the time frame, your acct size, risk profile, when your dealing with a larger we ekly chart, its best to drop down on the shorter term time frames and wait for the momentum to shift back into the direction of the trend



@chris [16:33:23]> CMA is our next chart; rising ADX above 30, but did have a sell divergence on the 3/10, so risk was much higher , also had a fast pullback down to the 60 min chart, 20 ema, was a grail buy, and turned back up and had not looked back.



@chris [16:34:15]> This is a good chart, EC / Engelhard Corp, had a big breakdown from the 32./50-33.00 range down to around 26.50/70 area…. @chris [16:34:34]> nice rising ADX, new momentum lows on the 3/10 also, the first rally back pushes a bit above its 20 ema, but after a week or so, @chris [16:34:46]> pulls back down, did not quite get its retest down, so becomes very important to trail a stop when trading much higher time frames, the shorter the time frame , the more predictable the market, the longer the time frame, the harder it is and more ex posure one holds



@chris [16:35:36]> Bonds, can see a 240 min chart, we actually looked at this on the Night Owl on Oct 3rd, so I re member this chart, we looked at this time frame for a potential grail sale on a rally to its 20 ema @chris [16:35:50]> but it did come off a buy divergence with the 3/10 making higher lows as price made lower lows, so risk was increased , this market had a retest down to get its grail sale objective



@chris [16:36:33]> The next examples are what Grail Buys and Sells will look like as the market is moving, in this example BNI has been rallying on the daily chart, nice rising ADX, even the 3/10 is rising, the first pullback down to the daily 20 ema will be a grail buy.



@chris [16:37:16]> Next Chart, EK, will also have a grail buy on the next pullback down on the daily chart. Both a rising ADX and new highs on the 3/10. @chris [16:37:56]> if your falling behind, no big deal, take your time , we will also have this posted to the site in the next 1-2 days



@chris [16:38:32]> In this next example, BJS has been selling off and the hourly ADX continues to rise, starting to see buy divergences in the hourly time frame, and a rally back up to its 20 @chris [16:38:36]> ema, will setup a grail sale opportunity. So, since we have buy divergences on the 3/10, the grail sale will still be valid although not as strong as the prior 2 that I just posted. @chris [16:38:58]> The Failed Pattern



@chris [16:39:30]> We have to always show a pattern that didn't work to balance out all the perfect ones! This is interesting, as we look at this chart; @chris [16:39:41]> we have a nice strong ADX, price rallied big, and this pulled back to its 20 ema for a grail buy right? and kept pulling back and back and and and ??????? Well…..lets look at this next example before we discuss this further. @chris [16:40:02]> In this Example, we have a chart of PD, can see how the risk greatly increases after a divergence, price made new highs, @chris [16:40:16]> but the 3/10 made lower highs, so when this stock pulled back, it broke 12 pts from the high, bypassing the 20 ema, so this is a good example to show how powerful a failed pattern can be. @chris [16:40:36]> Linda has always said, "Failed patterns lead to a greater move in the Opposite Direction".



@chris [16:41:07]> In the next example we see how this EC , Euro, rallied just under a key swing high in this market and turned back down, big trading range as you can see from the prior data, no wonder the grail was useless, it was in a trading range @chris [16:41:39]> , that brings me to my next thought, always look at your higher time frames, are you in a trading range ? did you just turn down from a key swing high ? or up from a key low ? This was NOT a grail, although it looked like one, kee p the higher time frames in front of you at all times.



@chris [16:41:53]> can see the other chart of the EURO @chris [16:42:13]> It is Vital to always watch those higher time frames and equally vital is to monitor the shorter term time frame s, @chris [16:42:22]> yes you may have a hourly grail buy, but do you have a short term BUY divergence ?? 3 push down? Maybe a trigger on a smaller time frame to put you into the trade? @chris [16:42:43]> There is nothing that is 100% successful, nothing at all, so, to stack the deck in your favor and increase your odds of success, look at what the overall market is telling you, do not blindly jump into a trade "because I think" as because is not a reason @chris [16:42:58]> , yes grails are awesome, I love them the most of all our patterns, BUT, there always has to be confirmation from something else to help you e nter a trade, many times we get questions, how come you didn't call the grail buy or grail sale, @chris [16:43:10]> well, may have been other reasons, maybe we had sell divergences off the top of the rally ? Maybe price tested to the top of its range like EC did and was not the best trade to take, and first and foremost, @chris [16:43:23]> you have to protect your capital, then filter out the best stocks or futures for a trade, then filter it down further so you know when you enter a trade, it's the right thing to do and you feel comfortable about the trade, win, lose, or draw. @chris [16:43:40]> Always ask yourself, did the market make new mom entum highs? or do we have sell divergences ? Is the m arket JUST breaking @chris [16:43:49]> out of a trading or at the end of a climax up? Is the market STILL in a



range and the "bull flag", the "grail sale" false ? Again, nothing is 100% but always keep in mind other factors that play into increasing your odds of success. @chris [16:44:06]> Somebody asked me how to scan for Grail Trades @chris [16:44:10]> Simple @chris [16:44:18]> very simple actually and you do not need code for this @chris [16:44:48]> Setup a Radar Scan or a @chris [16:44:52]> Spreadsheet @chris [16:45:08]> insert your symbols, I like to use only the S&P500 stocks for my scans @chris [16:45:31]> if I find a few Oils are trending, then I look at the oil sectore for more shares to watch @chris [16:45:38]> now, in that S&P 500 list @chris [16:45:43]> insert an ADX @chris [16:45:54]> and you can sort out from highest ADX down @chris [16:46:11]> this will give you all the potential grail trades, yes, you have to filter it down from that but @chris [16:46:20]> you will have the strongest trending stocks or markets @chris [16:46:32]> with commdities its as simple as looking @chris [16:46:59]> at a few charts, with stocks, you have alot more stocks to watch then commodities.....but thats all you need to do to find @chris [16:47:06]> trading opportunitites, now @chris [16:47:14]> Tradestation Radar Scan, they have it @chris [16:47:24]> so you can adjust the Time Frame for the scan @chris [16:47:47]> so you can look at the dailies, then change to a 15 min or 60 min time frame @chris [16:47:56]> and you scan from the highest ADXs down @chris [16:48:05]> takes a little bit of work, but its simple to use. @chris [16:48:14]> I hope you enjoyed reading this as much as I enjoyed working on it for you, lets have a great night and see you all in the morning, goodnight. ! @chris [16:48:32]> We will have our Sunday Night Charting Class this weekend !! that will be our next event ! @chris [16:48:38]> See you all in the morning ! @Dan [16:49:03]> Nite! @zac [16:54:48]> good night thanks chris @OT [17:02:58]> Great class, thanks chris! @OT [17:03:05]> good nite! HOME

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Linda Raschke Grail Class

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