Agreed and Advise

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Well Guys and Gals, following the review of Brussee's book, I thought the ES looked very vunerable and examining it would be interesting. All figures basis cash.

The 12-m closed below the PSZ but did not show bearish conviction because it closed in the middle of the range. If Feb closes as a bear bar or bear directional bar, we have a 12-M CIT of the trend that began in 1982. Now that's a scary thought. For my purposes, I'll settle for the PBZ (870 to 772) and see what happens when we get there. Seeing we are now at the 1340's, a target of 870 is still pretty scary.

The key support level at 1270 is the issue. If that holds, we are likely to form a 313 between 1577 and 1270. However if the market accepts below 1270, we are likely to see a directional move down. So, the first step is to ask are we likely to challenge the PBZ.

The 5-d shows the usual "Rejection of Two Extremes and Formation of Value Area" variety of 313 formation. In this case, we had rejection at A and B. The Value Area is now forming. The 30 min chart shows we are at the 4th attempt at the 1340 level basis cash. One of the few Gann ideas I use is the 4 times rule. If on the 4th attempt, the market fails to break through, expect the starting point of the opposite extreme to be taken out (1370 basis cash; 1368.5 basis Mar).

If the market does go through we can expect the 1317.5 (basis cash, 1270 basis March) to be penetrated.

So, we have a nice setup. Sell a break of the 1340 low on stop at 1336 with a stop and reverse at 1341.75 (basis March). This is one of the few times I'd sell a breakout. The target, basis March is 1281 to 1263. Given the 5-point risk and at least 50-point profit, this is a great risk-reward.

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