First let me start with saying that I find this work quite fulfilling. I would actually call it fun, but I can see how traders say its boring because once you know what you are doing, its just repetition. Every day is different though, and I find this gives me a good dose of intellectual stimulation. Hopefully one day I find it just financially rewarding as mentally.
Next we need to give a shout out to Niko. In the morning he posted an example of an hourly chart he drew, and now after 2 hours post open, this channel held up beautifully. I drew in the channel as he did and am presenting it here. I wasn't aware of this channel while I was watching price, but now I see that had I been aware of it, there would have been a good dose of confirmation to go long this morning after price bounced off 3662 twice.
Lets quickly talk premarket. The blue line in the second image shows the low of the overnight session as it was just forming, price kept coming down overnight. There was an incredibly tight hinge that was identified, and although the breakout wasn't spectacular, it seemed to act in the best way possible by testing the exit at A, and then dropping off in the same direction it left the hinge.
The low of B and C were made, which is what made me be able to draw is the overnight low. A climb to D couldn't break the hinge test at A. We then make another attempt at going lower than B and C, but price holds at E.
Opening! (next chart) I should have marked in another test of 72 just a bit after E, after which price shoots up to F. Back down to G, noting that it doesn't go below 72. Now up to H, which is below F, so lets drawn in a line. Now we make our way down to I and just as I am drawing in a possible hinge, price falls out the bottom. This time it breaks through the opening low/overnight low. A few minutes later it pokes up at J to test, and down it comes.
We hit a low of K, who's significance of taking into Niko's channel now is quite obvious, but not at the time. A rally to L is just less than 50% of the drop from J, and back down to M, which is just slighly above K.
When I look back to yesterday, this is the exact same thing. Right at opening we have price going up, two attemps to break a high fail, so down it comes. Then two attempts to break a low, so then it turns back up. Not calling it a pattern, just saying the behavior is similar, if not almost exact. In fact, the more I watch each open, the more I see that for the first 15 minutes, traders often have no idea what they want, and both sides can be in control until the dominant side wins out.
So now here is my problem. This low doesn't seem that special at the moment. We have a clear supply line (join H J), and just eyeballing it, even at the high of L it isn't broken, so perhaps a short can be taken below the crest of L which would be filled (this short would be a continuation of the move, not as a result of a line break). We hit M, oh ohhhh... a higher low. Then a minute or two later, SL is broken. No worries, the drill would be to just get out. I am actually visually quite good at drawing these in my head and seeing where the break would be. Not saying I am always doing this, but I can connect two points and extend the line and quite accurately trace where it goes when extended, in my head.
So I'm quite intrigued by the lower high of M. With SLA, since we had the break, we can enter in the opposite direction after a RET. Well, N to O is our RET, so just a point above O would get us in.
Looking at this another way, we have a higher low, from K to M, and a higher high, from L to N. So I'm trying to figure out if K and M really do represent the bottom of this move. Hard to make the call in real time of course.
Had I been using SLA, our DL would be drawn from M to O, and hence quite steep which gets broken at right about the blue line at 72. This is of course where your rules and observations come in. How clean is the break? In this case,the break is a ledge, and within a few minutes, we clear the high of the blue line and hence can fan our DL. It isn't broken again until roughly midway between Q and R. Had a long been taken at just above O or N, roughly 69, it is good for 10 points at an exit of roughly 80 when the DL is broken. (oppps.. we can actually make the DL even steeper after the swing low just past P. This makes our DL break even higher up for keeping a higher profit)
Without SLA, we are at P, which is slighly below an important level, and there is a micro lower high in there and a micro lower low. Not sure what I would have done, but I do see it. Keep in mind also that this chart now spans 40 points because the move from bottom to top was so big, so these short bars aren't really that short. I try and make sure that my window shows at least a 20 point range each time. When price is hardly moving, I compress the window on purpose so that little bars dont look too big. But on days like this, the little bars aren't really that little.
Once we clear the high of P and I stop looking for a double top we hit a series of lower highs again at Q. The higher lows at R, just barely higher, give us hinge. It does break out beautifully and doesn't come back. Its not a huge move, but if a long is taken at 82 when it leaves, its nice to see this level is tested again at T and V but not breached.
So at S, we once again appear not to be able to go higher, but after a dip down to T, we do make it up to U. Curiously, this level is the overnight high. Down to V, up to W. We have a hinge forming on the top, but the bottom is mostly flat between T and V. As we make our way to X, we can redraw the bottom to make it more like a hinge, but this bottom line isn't tested several times which is what I like to see in a nicely formed hinge.
The break at X was strong. Its hard to see in a static chart, but price dropped quite quickly. Had I been experienced enough to be trading, I would have wanted to short below this, especially once we break the low of T to V. We sadly don't get far though at Y, and quickly turn around and go the other way.
I know Db says that hinges often break in the opposite direction of the ultimate move like here. But in my analysis, many hinges were well behaved, and once they dropped, they only sometimes came back to test that level and then went off again in the original direction. So my gut feeling is you gotta take the trade in the direction that it leaves, but be open to SAR. If they do SAR, just take it, and if there isn't much action and just a tight trading range, then your loss is minimal. So hinges I do believe provide good trades.
At Z, we see how former resistnace provides support. We have no problem breaching the 91 level as it comes up, but when it returns on the RET, it provides good support.
So there is my detailed analysis. I want to study openings in greater detail as it seems like there is a way to take advantage of all that indecision. I should also redo this chart with just using SLA. The trouble for me is that I hesitate, and once I get enough confirmation, the great entry is gone. Mind you, when the moves are big like today, more confirmation might lead to a smaller point gain, but perhaps less scratching. Will have to investigate.
