Making of a method
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FT Day 18 Sept 17
R: 3182 (SH congestion from 16th)
R: 3178 (mp of wave from 2000 to 3156)
R: 3173.50 (PM High)
R: 3170 (LH from PM)
S: 3163 (Top of range from yest close thru PM)
S: 3156 (multiple tested)
Story 1: Yesterday's sell off found multiple S at the 3156 level. Since PM, price has been climbing out of the ON range. Recently a strong 9 point buying surge took place. This has now sold down back to where it had started. The LOLR is up. Next level is the mp of the selling wave from yesterday at 82.
Story 2: The complete reversal of the 9 point PM surge and the hinge action thereafter shows a lack of buying power to overcome yesterday's selling. Price likely to go back to the ON range and test the 56 level again.
Review:
As I look at the climb from the S level o 56 to 86, I ask myself - why wasn't I able to profit from it?
1) The best entry was the break out of ON range during PM - outside my normal trading time.
2) The next best entry to take advantage of the LOLR up thesis was during 0844, as price found S at 70. As price broke out of the hinge during the open, it found substantial R at 74. Thereafter, a mini range was created as price bounced back and forth between 74 and 70. I viewed this action as indecision on the part of traders and waited for price to clear this zone, either up or down. Eventually, a BO ret entry was made at 0852.
However, the question is whether I should have taken the Reversal entry off mini range S in anticipation of the larger thesis of LOLR holding?
I should have because:
The S at 70 provided a low price risk entry in anticipation of the larger thesis of price moving to the mp zone of 82. While the R at 74 lowered the odds of this thesis a bit, the immediate PA still warranted a bet on the LOLR up thesis because:
Normally, a failure of follow through on a hinge break often causes price to move in the other direction. In this case, however, price instead bounced around a narrow range creating pressure, while still preserving the upward bias.
Observation on BO Anticipation behavior:
Even though the Rev off 70 from mini range bottom was missed, there was another opp to enter in anticipation of BO. Normally, it is not a good idea to go long just below Range R. However, the nature of the final climb from S at 70 to R at 74 was different than the previous swings within this range. While the previous swings were choppy, consisting of large and fast up and down moves, the final climb to R was more steady with shallow retracements. Then, there was a final ret just below R, and 72.50 acted as immediate S. This indicated pressure building to break through R.
This sort of entry would be justified only when a larger thesis is still valid. If there is no strong thesis, then I can continue waiting for price to BO and then retrace back towards the S/R level.
http://www.sierrachart.com/image.php?l=1379437316738.png
R: 3182 (SH congestion from 16th)
R: 3178 (mp of wave from 2000 to 3156)
R: 3173.50 (PM High)
R: 3170 (LH from PM)
S: 3163 (Top of range from yest close thru PM)
S: 3156 (multiple tested)
Story 1: Yesterday's sell off found multiple S at the 3156 level. Since PM, price has been climbing out of the ON range. Recently a strong 9 point buying surge took place. This has now sold down back to where it had started. The LOLR is up. Next level is the mp of the selling wave from yesterday at 82.
Story 2: The complete reversal of the 9 point PM surge and the hinge action thereafter shows a lack of buying power to overcome yesterday's selling. Price likely to go back to the ON range and test the 56 level again.
Review:
As I look at the climb from the S level o 56 to 86, I ask myself - why wasn't I able to profit from it?
1) The best entry was the break out of ON range during PM - outside my normal trading time.
2) The next best entry to take advantage of the LOLR up thesis was during 0844, as price found S at 70. As price broke out of the hinge during the open, it found substantial R at 74. Thereafter, a mini range was created as price bounced back and forth between 74 and 70. I viewed this action as indecision on the part of traders and waited for price to clear this zone, either up or down. Eventually, a BO ret entry was made at 0852.
However, the question is whether I should have taken the Reversal entry off mini range S in anticipation of the larger thesis of LOLR holding?
I should have because:
The S at 70 provided a low price risk entry in anticipation of the larger thesis of price moving to the mp zone of 82. While the R at 74 lowered the odds of this thesis a bit, the immediate PA still warranted a bet on the LOLR up thesis because:
Normally, a failure of follow through on a hinge break often causes price to move in the other direction. In this case, however, price instead bounced around a narrow range creating pressure, while still preserving the upward bias.
Observation on BO Anticipation behavior:
Even though the Rev off 70 from mini range bottom was missed, there was another opp to enter in anticipation of BO. Normally, it is not a good idea to go long just below Range R. However, the nature of the final climb from S at 70 to R at 74 was different than the previous swings within this range. While the previous swings were choppy, consisting of large and fast up and down moves, the final climb to R was more steady with shallow retracements. Then, there was a final ret just below R, and 72.50 acted as immediate S. This indicated pressure building to break through R.
This sort of entry would be justified only when a larger thesis is still valid. If there is no strong thesis, then I can continue waiting for price to BO and then retrace back towards the S/R level.
http://www.sierrachart.com/image.php?l=1379437316738.png
No. You are in the midst of a Settlement Gap Test before news at 0900 CT as evidenced by NDX 80 Held Offer. Then you have NDX 80 Failed Offer into the news event followed by NDX 80 Held Bid after the news. NDX 80 Held Bid after a test of the Settlement Gap is the best Setup of the entire RTH Session. You are trading into the Daily Pivot but given the Settlement Test you go with it knowing it is a high payoff ratio situation.
Your entry at 0852 was aggressive at NDX 80 Failed Offer but still reasonable, especially if you add to it at 0906 with NDX 80 Held Bid.
Attached. The Settlement Gap is visible relative to yesterday's RTH Close. The Fib levels are applied to yesterday's RTH range, Close to Close. They just indicate the area of the 24hr Daily Pivot that everyone is watching. NDX 3180 is conveyed by the Blue Line.
First it is 80 Held Offer, then Failed Offer, then Held Bid.
As in
1. Can't go up.
2. Can go up.
3. Can't go down.
First it is 80 Held Offer, then Failed Offer, then Held Bid.
As in
1. Can't go up.
2. Can go up.
3. Can't go down.
By 0916 EST, the 9 point buying surge had sold down almost completely. Despite the larger LOLR being up, this dramatic action took away confidence from the LOLR up thesis. Then at 0921 a hinge formed.
I am not seeing why a long entry at 0909 or 0916 EST would be justified if the most recent action (the sell down of the 9 point surge) is signalling heavy selling and indecision.