As Simple as ABC!
Christmas has come around quickly and discussions around the good old ‘Christmas Rally’ are never far away. No doubt some markets will give us great rallies, although it always pays to keep watch out for setups across a range of markets and be prepared to trade long or short.
When looking for great trades I keep my analysis simple and follow a structured approach which means I ALWAYS start with swing charts. This is my bread and butter because most of the time it keeps me trading with the trend. If I could only look at one set of charts for the rest of my trading career it would be swing charts.
As I scroll through my saved watch list looking for an opportunity to trade a high Reward to Risk Ratio setup, I see a weekly ABC formation on Sugar forming. Weekly ABC’s have been a focus point of late because of the opportunity they can generate and the simplicity of the setup that anyone at Active Trader Program level can execute.
If I keep to my rules the higher my chances of a good return are and less likely to have a draw down.
So, taking a look at Sugar, the cluster I see is as below.
- 50% weekly swing retracement = 15.46
- 150% of the daily First Range Out = 15.445
- 100% last daily swing range = 15.45
Chart 1
There are three good price reasons clustered very close together to warrant stalking this market. The great thing about this setup is the price cluster is so close together, that it gives us a tight window for a potential place to enter which is a very good thing!
I have my trap in place but not loaded just yet, my work isn’t done as the market still needs to unfold in a certain manner to satisfy my trading plan. Of course, this market could head lower from here and not get any closer to the price cluster, which is perfectly fine. Or it could also keep going up and push through.
So now I watch my Wheels within Wheels and look at the swing chart milestones on the next time frame down, the 4-hour swing for added price milestones. At the time of writing this 4-hour
Chart 2
From the current daily low of $14.72, I would preferably like to see, three or four, 4-hour swings into the price cluster with a contracting swing range or a repeating swing range to finish. Then I would like to see a 4-hour signal bar that is a small range, so a point of entry has a low risk in terms of points.
If the above comes together then my trading plan says to enter as the 4-hour swing chart turns down, then look to move my stop loss to breakeven within the first 1-3 days to a point where if the market does turn around and take me out, it would indicate the market is going to continue up.
Then my plan is to let the trade run and look to take profits at a level of strong price support with a Reward to Risk Ratio that exceeds 10 to 1. As simple as that!
As this is the last Safety in the Market Article for 2025, I wish everyone all the best for the Christmas and New Year and look forward to catching up in 2026 as there are some exciting moves expected which will give some great trading opportunities for those prepared!
Happy Trading,
Gus