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Pre-open Scenarios

Although the overall trend is down, the Dax is in a corrective structure until it break 10253 on the downside or makes a new swing high above 10600. Yesterday was an inside day, indicating that the market is contracting.

ON, the market has reversed most of yesterday’s losses with a Futures open at 10520 (gap up of 103 pts) and the cash open was 10522.

The H4 chart on the left shows how the initial downtrend broke it’s upper TL and then formed a new minor downtrend above the original and began to compress. The H1 chart shows the orange TL that supports the ON move

On the H4 chart, the TL and KL converge to create a strong level to either be resisted or burst through. ON action has been very strong with barely a retrace; the question is if and how the TL supporting the move would break. Would it be a small retrace to partially close the gap and then resume the ON strength? Or would the ON action be reversed to continue the downtrend?

What the market looked like at the end of the day

This shows the PA until lunch time, before the market had really taken off. See Anatomy of the 4 Jan rally for the break away PA

Key points about today’s PA and setups that worked
  • The market made a false break of the ON TL during the futures session.
  • The open was a breakaway open, as it was above y’day High, CBOL and R1 and buyers piled in, driving the market straight into my RES 1 level where it reversed.
  • The ON TL saw a few false breaks and then was smashed through for an immediate 35pts, overshooting CBOL and Weekly Pivot.
  • The reversal paused at the 10500 BNR and again at the TL, and eventually regained the Neutral Zone.
  • Retests the Tl and then explodes upwards, powering straight through RES 1 which had capped gains in the opening minutes.
  • The next TL saw a very minor pause – indicting little selling power – and then more buyers above it.
  • R2 was overshot too but did trigger a retest of the TL below it.

How effective was my Neutral Zone? This was spot on; the action during the futures session showed that the TL was active, the reversal of the buy-in at the cash open conformed the upper edge of the zone.
How precise were my levels? RES 1 was spot on, SUP 1 was overshot by 11pts and it should have been below the Weekly pivot and CBOL and not above it. RES 2 saw a minor retrace and so did RES 3 but they were not significant. See Anatomy of the 4 Jan rally .

What I did

0-09:00 Sell x 85 @ 10526 | Cash open spike | P&L = -1R
09:02 Sell x 84 @ 10534 | Cash open spike | P&L = -1R
09:04 Buy x 31 @ 10550 | Mistake | P&L = -0.1R
09:04 Sell x 77 @ 10548 | 3Min Bolli | P&L = +3R
09:05 Buy x 83 @ 10551 | M1 TL break | P&L = -1R
09:06 Sell x 83 @ 10542 | Fade using M1 TL break | P&L = +3.4R
09:12 Sell x 90 @ 10514 | M1 T break (EA)| P&L = -1R
09:15 Sell x 86 @ 10516 | M1 TL break | P&L = -1R
09:15 Sell x 31 @ 10518 | Mistake | P&L = -0.1R
09:15 Sell x 23 @ 10514 | H1 TL break by hand | P&L = -1R
09:24 Sell x 90 @ 10521 | M1 T break (EA) | P&L = +0.8R
09:28 Buy x 93 @ 10522 | M1 TL break | P&L = -0.8R
09:36 Buy x 80 @ 10504 | 3Min Bolli | P&L = +1.4R
09:55 Buy x 88 @ 10508 | Triangle on M1| P&L = +2.6R
09:58 Sell x 89 @ 10523 | Fade using M1 TL break | P&L = -1R
10:01 Sell x 88 @ 10524 | Fade using M1 TL break | P&L = -1R
10:06 Buy x 96 @ 10523 | Fade 169 | P&L = +2.8R
10:15 Sell x 81 @ 10537 | 3Min Bolli | P&L = -0.3R
10:16 Sell x 81 @ 10536 | Mistake | P&L = -0.2R
10:19 Sell x 88 @ 10535 | M1 TL break | P&L = R

TOTAL = +3.6R | # Trades 19 — Winners 6 — BE 0 —

Today’s most gorgeous setup

Buy SUP 1 using the 3Min Bolli system. It may have required two entries as the level was a few pips too high. I took the trade but didn’t get in until 10502, but with the BNR as a support and the strength of the reversal, this trade worked.

For reference: 3 month cash chart at COB yesterday

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