Preview. To qualify for the Best Dressed List, a market must meet the following criteria:

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Winfred Gaines
6 years ago
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1 Best Dressed List

2 Preview Each year at about this time we publish the Best Dressed List, showcasing the best examples of classical charting principles from the just-completed year. The Best Dressed List illustrates the types of trading situations that Factor LLC has sought over the years in its proprietary account. These types of trading situations are the main focus of Factor LLC s trading. To qualify for the Best Dressed List, a market must meet the following criteria: 1. A clearly defined (no doubt about it) classical chart pattern at least 12 weeks in duration on the daily and weekly charts in a tradable market. 2. A decisive breakout with little or no pattern retesting. Secondary breakouts are considered when an initial earlier breakout failed. 3. A sustained trend to the implied target. Whether or not Factor LLC successfully captured the pattern is not a criteria for inclusion (at least not consciously). The list is broken down into three sections: Best Dressed List Honorable Mention List Promising Best Dressed Charts for 2014 Historically, our challenge has been to limit the list to only 10 market situations. This year, for the very first time, we had difficulty coming up with our list. This is due, in our opinion, to the choppy nature of futures markets in

the December 2013 contract topped in early 2013 with a classic H&S pattern.

3 Best Dressed List Corn (Dec. 2013) 5+ mo. H&S top 12/26/2012 at on 3/7 512 on 5/21 After a 30-month bull trend in Corn, the December 2013 contract topped in early 2013 with a classic H&S pattern. Of significance, the nearby continuation chart topped in August This fact added credibility to the top in the December 2013 contract. 3

Aussie $ 23-mo. triangle and 9- mo. rectangle 5/9 at 1.0067.

rectangle and a 23-month triangle. The initial target of.9019 was met in July.

4 Aussie $ 23-mo. triangle and 9- mo. rectangle 5/9 at on 7/3 The over the edge of the cliff decline in the Aussie in May completed a 9-mo. rectangle and a 23-month triangle. The initial target of.9019 was met in July. A further target of.8050 exists on the weekly graph. Perhaps a continuation pattern in 2014 will put the Aussie on next year s Best Dressed List. 4

Japanese Yen (futures) 26-mo. H&S top 12/12 at 1.2010 1.

futures (a bottom in the spot USD/JPY). Note that the 26-mo.

5 Japanese Yen (futures) 26-mo. H&S top 12/12 at on 3/8 The decline in December 2012 completed a massive H&S top in the Yen futures (a bottom in the spot USD/JPY). Note that the 26-mo. top was ignited by a 3-week pennant. This is not unusual. Often times a huge pattern is launched by a smaller configuration. 5

6 Gold 18-mo. rectangle 4/12 at on 6/26 The crash decline of April 12 completed a historic rectangle top in Gold. The target was met in June. Gold 10-wk. pennant 6/20 at on 6/27 A pennant developed after Gold s first downward thrust. This 10-week pattern was completed on June 20, leading to the final down leg in the metal. 6

Live Hogs June 6+ mo. H&S top 2/6 at 95.50 90.

We have found Live and Feeder Cattle to be undependable charting markets.

7 Live Hogs June 6+ mo. H&S top 2/6 at on 2/25 The only livestock market traded by Factor LLC with any regularity is Lean Hogs. We have found Live and Feeder Cattle to be undependable charting markets. The decline in Hogs in February completed a H&S top, the target of which was quickly reached. Live Hogs July 3-mo. horn 5/31 at on 6/10 Following the attainment of the target from the H&S top (see top box), Hogs formed a 3-month horn pattern, also called a sloping bottom. 7

75 on 6/20 The decline in late May completed a

8 Eurodollars Dec mo. H&S top 5/28 at on 6/20 The decline in late May completed a massive H&S top. After retesting the neckline for a week or so the market fell away. 8

weekly chart. A compound fulcrum is basically a complex continuation H&S top that serves as a bottom.

9 Cocoa Possible 20-mo. Compound fulcrum and 3-mo. H&S 8/7 at on 9/17 It was apparent in July that Cocoa was building a possible compound fulcrum on the weekly chart. A compound fulcrum is basically a complex continuation H&S top that serves as a bottom. The daily chart provided the ignition by completing a 3-mo. H&S bottom in August. The target of this pattern was met in September. The compound fulcrum has an unmet target at

Honorable Mention List Copper 18-mo. triangle 3/18 at 341.15 300.20 on 6/24 The decline in mid-march completed an 18-month triangle in Copper.

Silver 19-mo rectangle 4/12 1650 The bottom boundary of this pattern was very well defined with and the breakout was clean and decisive.

10 Honorable Mention List Copper 18-mo. triangle 3/18 at on 6/24 The decline in mid-march completed an 18-month triangle in Copper. Note the bull trap in early February. The market reached its target of 300 in June, but only after a 35+ cent rally in May. Silver 19-mo rectangle 4/ The bottom boundary of this pattern was very well defined with and the breakout was clean and decisive. There is one reason Silver is only an honorable mention its target of 1650 was not met. Yet, even if a market does not travel directly to a target, a decisive breakout of a pattern provides traders with a variety of options. 10

Best Dressed List candidates for 2014 A question we always ask ourselves when analyzing charts for a possible trade is this Does the chart and market in question have the potential to become a member

11 Best Dressed List candidates for 2014 A question we always ask ourselves when analyzing charts for a possible trade is this Does the chart and market in question have the potential to become a member of the Best Dressed List. A number of patterns currently under construction are possible candidates for the 2014 list. RBOB Gas 32-month rectangle? TBD The RB Gas has been in a broad trading range since April We do not believe this will be a permanent trading range. 11

12 Copper 9-mo. H&S bottom?? Even as we prepare this document, Copper is challenging the neckline of a possible H&S bottom. The belabored duration of the right shoulder is a caveat for us. Yet, a decisive close above the neckline would speak for itself. The target would be

qualify the Yen futures for the 2014 Best Dressed List Mexican Peso 6-mo. coil or triangle?

13 Japanese Yen futures 6-mo. symmetrical triangle Nov. 21 at 9887 Initial target of 9639 met on 12/13 Extended target is 8841 The attainment of 8841 will qualify the Yen futures for the 2014 Best Dressed List Mexican Peso 6-mo. coil or triangle?? This pattern could go either way. This is a carbon copy pattern of the triangle completed in the Topix in November The monthly charts would suggest a downward move ahead. 13

Eurodollars (Dec. 2017) 12-week H&S top and 29-mo. H&S top 12-wk top completed on 12/19 at 96.72 96.

Yet, a massive 29-mo H&S top is developing. Canadian Dollar (futures) 45-mo M top?

14 Eurodollars (Dec. 2017) 12-week H&S top and 29-mo. H&S top 12-wk top completed on 12/19 at on 12-wk pattern The 12-week H&S top will be on the 2014 Best Dressed List if the target of is met. Yet, a massive 29-mo H&S top is developing. Canadian Dollar (futures) 45-mo M top?.8200 The Loonie is attempting to penetrate support at.9350 to A decisive close below.9350 could usher in a significant bear trend. 14

15 Topix (JSE) 7-month half-mast coil? 1730 The Topix is attempting to complete a 7-month triangle. Based on the monthly chart (top), our guess is that this triangle will become a half-mast coil. 15

8049 The massive triangle top in the Aussie has an unmet target.

16 German Bobl 24-mo H&S top?? The charts would indicate that the Bobl yield will go from.9% to 2.35%, perhaps starting within the next couple of months. Aussie $ Completed triangle top 5/9 at The massive triangle top in the Aussie has an unmet target. I am hoping for a continuation pattern to take the market to its target. A rally toward to would put the market into a sell zone for Factor. 16

point. A decisive close above 1.7000 would establish a possible target of 2.

17 British Pound 5-year triangle?? This ever-narrowing trading range in the Cable is sure to be resolved at some point. A decisive close above would establish a possible target of Heating Oil 33-mo continuation H&S top?? The entire right shoulder from the Oct high displays a H&S bottom formation. 17

S&Ps 13-year rectangle May 2013 3250 semi log 2345 arithmetic I believe the end-of-society-as-we-know-it-perma-bears have it all wrong in the U.S. stock market.

18 S&Ps 13-year rectangle May semi log 2345 arithmetic I believe the end-of-society-as-we-know-it-perma-bears have it all wrong in the U.S. stock market. The sustained advance during 2013 completed a multi-year rectangle. Depending upon whether a semi-log or arithmetic scale is used, the target ranges from 2345 to A correction toward 1600 is a major buying opportunity. 18

19 Gold 7+ month double bottom? 1675 Double tops and bottoms are the most misdiagnosed chart pattern. According to Edwards and Magee, a double pattern has very strict criteria in terms of time duration and height. Gold would fulfil the definition of a double bottom with a decisive close above 1450 or so. Something to watch in

20 Review So, what is the point of the annual Best Dressed List? It depends! If you are a casual user of charts in your trading this document will be an interesting read, but not much more. And that is ok. Similarly, if you are a swing or scalp trader this document will have only passing interest. But, if you rely primarily on classical charting principles and if your goal is to catch the really big and significant chart patterns, this document can become a point of reference. A study of the Best Dressed List trading situations is a reminder that the most profitable major patterns have several things in common. There is no hurry to get aboard early. It is best to wait until the real move begins (although mature patterns often give an advance warning). An urge to preposition often ends in getting chopped up and then missing the real move when it comes Breakouts are decisive. While a process of retesting can occur, a well-timed entry is seldom put into a serious loss Even though a market can be oversold or overbought at the point of breakout, there is actually very little risk at entering at the breakout The moves to the targets can be most often sudden and quick. Patterns that take months to develop can deliver their profits in a matter of days As a general rule it is best to exit at the target and then avoid any temptation to reenter the same market any time soon ### 20

21 Factor LLC Best Dressed List 2013 Market Pattern Date completed Breakout price Profit goal at target per Worst Intraday loss per Worst closing loss per contract contract contract Best Dressed December Corn 5+ mo H&S top 12/26/ $2,850 ($325) ($100) Aussie Dollar 9-mo rectangle 5/ $10,480 ($220) ($0) Japanese Yen 26-mo H&S top 12/12/ $19,750 ($350) ($0) Gold 18-mo rectangle 4/ $21,400 ($700) ($0) Gold 10-wk triangle 6/ $11,900 ($400) ($0) Live Hogs 6+ mo H&S top 2/ $2,000 ($120) ($0) Live Hogs Eurodollars (Dec 2012) 3-mo horn or 5/ $1,960 ($360) ($200) sloping bottom 12-mo H&S top 5/ $1,525 ($475) ($175) Cocoa 3-mo H&S bottom 8/ $2,380 ($130) ($0) Factor LLC Colorado Springs, CO

To qualify for the Best Dressed List, a market must meet the following criteria:

To qualify for the Best Dressed List, a market must meet the following criteria: Best Dressed List -- 2011 Each year at about this time I publish the Best Dressed List, showcasing the best examples of classical charting principles from the just-completed year. The Best Dressed List