Pre-open Scenarios

Yesterday the market retraced neraly 50% of Friday’s move and then bounced into the close to the 61.8% fib. ON, it has weakened further and now sits around the arrowed area on the chart below. This is the 61.8% fib of the entie move from 3rd to 27th Dec last year. The PA ON and so far since the futures open looks stronger than would be expected from a move to correct and over-excited market. But we also have the cash chart 50MA at 11031, so it may be that buyers are waiting for this to postion themselves long for those juicy unfilled gaps above.

1 month daily chart – see the cahrt below for the significance of the ornage arrow
3 month daily chart showing the importance of the 61,8% fib at 11084

Futures opened at 11082, a 54pt gap down and below CBOS and S2. S3 is within reach at 11060.

H4 and H1 charts during the futures session

The level circled in pink on the H4 chart on the left is the daily cash chart 50MA. On the H1 chart on the right, the levels circled are the ex-gap and closing gap. The steep TL shows how negative the ON action has been.

What the market looked like at the end of the day

Key points about today’s PA and setups that worked
  • everything looked weak at the open, as the market gapped down and stayed below CBOS.
  • at the cash open it dipped down to my SUP 1 for a perfect buy and from there it rallied right up gap close which was 80 pts above my level
  • RES 1 saw no reaction, CBOS saw a small retrace and a lot of order flow; S1 was the same – minor retraces and plenty of order flow
  • these responses to KLs indicate a trending market – even though it was below yesterday’s low and close, was short term trending.
  • this momentum meant that there was very little selling at the ex-gap fill at yesterday’s low and it overshot the closing gap too.
  • the high of the day was the 71.8% fib of the Jan 7th to Jan 18th move
  • from there the market made an even faster descent and the low during cash hours was the daily cash chart 50MA at 11033.

How effective was my Neutral Zone? The upper edge needed to be at the closing gap (11136) instead of the ex-gap (11126). The lower edge was hit on the nose from where the market bounced back up to RES 1

How precise were my levels? SUP 1 was the perfect buy entry for 80pts at the open. RES 1 offered no resistance on the way up as the market went straight through it and began to trend. RES 2 was below the closing gap so the market went straight through that too. On the way down, RES 2 failed to hold the market but the pause at the level gave an excellent Impulsive-Corrective setup. RES 1 failed as a fade on the way down but was the perfect level for retests – it failed three times at the level and eventually broke SUP 2. SUP 2 was exactly right and the market bounced 60pts from there on the first hit.

What I did

TOTAL = 2.46R | # Trades 17 — Winners 6 — BE 1
Average R per winner 1.95 — Losses > 1R 0
Without management (50pt TP) TOTAL = 7R — Winners 4

Today’s most gorgeous setup

Sell gap close. This trade went reversed all the way down to daily cash chart 50MA, giving 100pts or 10R. There were plentyof places to add too – using Impulsive-Corrective structures and Igloos.

For reference: 3 month cash chart at COB yesterday

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