I listened to a short interview sent to me via email by a trading friend that was on CNBC. Let me add in here, I don’t watch CNBC and I don’t listen to any news before or during my trading day. I am a firm believer in following price and specific price patterns that form as a result of bulls and bears trying to come to some form of agreement.

In this interview the moderators and the guest were going round and round trying to come to some type of agreement on the condition of the current market, bull or bear. One said he could find a strong argument for both. Hmmmmm, it made me think of a quote from Jesse Livermore that stays with me and made a large impact on me the first time I heard it; “There is neither a bull side nor a bear side - but only the right side.”

In other words, if you get locked into a strong opinion trading you may not see the forest through the trees, or for that matter the bulls or the bears in the forest. My best advice to traders is, stay focused on what price is telling you and always keep an open mind.

In the next blog article I’ll talk about the all important Support and Resistance and how this can help you to stay focused and keep an open mind.

I recently gave a webinar on the Powerful Butterfly Pattern. As many of you know this is a reversal pattern and a true contrarian trading pattern. When they perform as a reversal pattern you will see them at major tops and bottoms. They will form in all time frames and in all markets.

Did you also know that sometimes you will see them forming within a range? The example shown below is from a 400 tick SP 500 Emini chart. You can see the Fibonacci retracements of the previous swing from high to low on the chart. In this particular instance, the market had a small gap up open and the .618 retracement area was just above the gap close providing good support.

The Butterfly Pattern formed as the leg down to the .618 and gap close area. Study the chart below and see if you can spot some intraday, intra-range Butterfly Patterns!

Best Wishes for Successful Trading!

At our recent Patterns for Profits Live Newsletter we pointed out some potential large resistance areas in the SP 500. We had been watching 1007 area which had been the November, 2008 highs, we saw a small reaction down so far from that area. The next level up is the 1014 - 1018 area. This area is now starting to see sell patterns form on the smaller time frames. This area is a .382 retracement from the 2007 highs. Interstingly it is also the 1.27 extension area from the large Daily Butterfly Buy pattern that completed in early March of this year. I will be giving a free webcast on August 18 on the Butterfly Reversal Pattern. Please sign up on the homepage under webinars/seminars to learn more about this pattern.