Pre-open Scenarios

The market gapped up at the open ON and held on to it’s gains. This was the picture at the close of business on Friday.

The market has been in a bullish corrective sequence since 20th November – the question is whether this will morph into something more i.e. a new uptrend and especially with Christmas around the corner and expectation of a ‘Santa Rally’

From the H4 and H1 chart which show the ON action, you can see that both resistance levels have been broken. The market is now at a critical point: the D1 upper TL; so the question is whether it will motor straight through that and move towards 11600, or whether we see limited further gains today because (1) the market want to digest the ON move and (2) it wants to fill at least part of the gap left ON.

The H1 chart on the right shows today’s key TL, the D1 upper TL and the H4 chart on the left shows the gap left by the ON move.

How effective was my Neutral Zone? It was not possible to use a normal neutral zone a the market had gapped up into new territory  so instead I drew a Neutral Zone to trade retraces (pink , which covered the ON range. The breakout of the range saw and once te market was back inside the zone it was safe to short.
How precise were my levels? RES 1 was spot on, SUP 1 saw a rally start just 4 points above the level.

Strategy for today’s PA

Today’s PA was difficult to short because we had broken two key TLs and the weekly cash chart 200 MA and were maintaining those levels. However, after an initial flurry of buying at the open, the market started to  drift and range; if hit my RES 1 level and then reversed – that level turned out to be the high of the day.

If the trend is to continue, it needs to reverse off the retest and make a stair-step up to a new high, but when it breaks the two TLs after failing to regain the previous high then a counter-trend trade is likely to work

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