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What happened

The TL supporting the underside of the corrective retrace that had been forming since the 11 Sept low. Prices had retraced more than 73.6% of the 28 Aug to 11 Sept move and then started to stall. By Friday’s open, the first TL had already broken and now a second lower, upward sloping T had formed on the H1 chart. This is the line i was interested in trading. If the market had broken the ON (shown in blue box on the H1 chart on the right), then I would have started thinking about getting long.

This is what the H1 chart looked like by the futures close (22:00 MEZ).

How the TL broke

Price went straight through the TL at the cash open. It bounced the  first time, regained the TL and then reversed at M1 169 SMA (shown below in green-yellow-red as colour depends on the slope). On the second break it powered straight through without looking back.

How the PA evolved

The market hugged the 3min BB lower band until it hit multi layers of support where buyers were waiting (CBOS, 2xD1 fibs, Mth S1). It bounced there around lunchtime and the declined again. As the chart shows, my first line of support was not relevant but the second saw a good reaction. The trade didn’t set up though because price was not outside the BBs.

The reversal could have been traded as a triangle on the M1 had I been at my screen. Easy in hindsight of course but with an extended move, NFP later, so many lines of defence for the bulls and a compression it would have been an irresistible opportunity.

 

How I traded it

I traded this by selling the  TL breaks on the M1 and H1 chart. The M1 trade used a 10pt stop and was stopped about 2mins after it opened, The second attempt at this trade, one the second break of the TL used the same trade parameters and worked a treat. The H1 trade used a wider PA stop at 12267 or 34 pts and had a target 12110 which was hit.

  • M1 Futures open spike = -2R
  • M1 chart: first TL break = -1R
  • M1 chart: 2nd TL break = 2.2R
  • M3 chart =1.8R
  • H1 chart: first TL break = 2R
  • Day total =+3R

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