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03/09/2007 Archived Entry: "S&P, weekly E-Mini Bread and Butter trade."

Note for Readers: The "Bread and butter" trade is a DiNapoli pattern, well worth studying.

Nat wrote:
> Neal,
>
> I have always enjoyed you’re Mr. Spock like updates. You really seem to be able to take the emotion out of your voice and my guess is that is a reflection of your trading style (not easy to do).
>
> I have attached a chart of the weekly emini. Your latest 3/1/07 update prompted this e-mail.
>
> Many fib traders are writing on the web they are drooling waiting to go long for a bread and butter trade on a weekly time frame. As you can see this trade is picture perfect in the setup. I have confluence on a weekly 382 fibnode (1375.50) and a daily cop (1375.00, calculated off the thrusting bars of 2/26 (a point) ,2/27 (b point), 2/28 (c point)). My problem is that this market thrust down in a very strong way after, in my opinion, being very over bought for a very long time. I am hesitant to go long for the B&B trade (I do not have the luxury of trading intraday). I had come to this conclusion before I played your update from 3/1/07. You seem to be in agreement with me that it is prudent to wait to see if the next swing high is lower than the 2/22 high.
>
> I do not have the experience you do. Can you be more specific why you wouldn’t take the bread and butter weekly trade to the long side? Again I discounting trading intraday.
>
> Hope things are well with you and your family on the West Coast.
>
> Regards,
> Nat

OK Nat, I'll try to be more emotional in my updates. Just like they are on TV (Jim Cramer).

This market could well reach the .618 rally back up (as in a profit objective for B&B. The odds of capturing it on the weekly chart are reduced, much better on the daily. Unfortunately the daily pattern would not technically qualify as a Bread and butter, it does not meet the strict definition.

The reason for my caution is that the weekly down-bar was so severe, it makes all the preceding up-move look like a weak rally (insufficient thrust).

-Neal.