Success in the 30-Year Bond
Education
Last week, one of the charts I put in under the trading ideas section was of the 30 year bond. I used strong words to describe the opportunity saying that the demand and supply levels on the chart were a "dream" for active traders. Typically, I don't use words like that unless I am very confident about the opportunity based on years of trading experience. I received some emails asking about the quality of a level so we will deal with that a little bit here. One of the most important things about a quality level is how price originally leaves the level. If price moves away from an area of equilibrium in strong fashion, it is moving away strong because there is a large supply and demand imbalance at the level. If price slowly drifts away from the level, it still may be a trade we will take, just understand that the supply and demand imbalance at the level is not that out of balance. The higher the "imbalance" at the level, the higher the probability of the trade working out well. The 30–year bond supply level in last week's letter triggered right away and paid about 3:1 the first day. If you're a trader that took this trade, send me an email and let me know. Congrats!
30 Year Bond Supply from Last Week's Letter
Trading Ideas
Russell Futures
The Russell will start the week off with a supply level just above current price. Notice the significant and strong initial decline from the level suggesting a strong supply/demand imbalance at the level. Active traders can look to take short term shorts from the level. Keep in mind that the Russell is $100 per point per contract and it can move very fast. As always, keep your trading low risk. The supply and demand levels are designed to help you do that.
SMH (semiconductor sector)
This is a chart of the SMH, the ETF for the semiconductor sector. Notice where current price is on the chart. Not far above, we have a supply level that has not been revisited. Further below, we have a demand level that has not been revisited yet. The distance between them is the "profit margin" which in this case is large. You can certainly trade this ETF at the levels shown here but also, you can use this chart as a guide for semiconductor stocks this week such as XLNX, NVLS, KLAC, NSM, and others…
Silver is not as popular as Gold but it certainly has a significant demand level below current price. This level is ideal for a few reasons. First, it is well placed on the supply/demand curve. Second, it has a decent profit margin which we need if we are to get paid. Traders can look to buy the first pullback in price to the demand level shown here with a protective sell stop just below the level.
Have a great trading week. If you have any questions, please email me. While some emails take longer than others to respond to, I will always respond.
- Sam Seiden, sseiden@tradingacademy.com
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Sam brings over 15 years experience of equities and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has traded equities, futures, interest rate markets, forex, options, and commodities for his personal interests for years and has educated hundreds of traders and investors through seminars and daily advisory services both domestically and internationally. Sam has been involved in the markets since 1991 both on and off the floor of the Chicago Mercantile Exchange. He has served as the Director of Technical Research for two trading firms and regularly contributes articles to industry publications. Sam is known for his trading, technical research, and educational guidance.