Pre-open scenarios

Big falls ON have lefts gaps greater than 200pts. This is more like it … The market is now back to where it was on 23rd April so that is nearly two week’s of gains gone. There was buying into the futures close on Friday and these buyers were either stopped out on the open or are trapped with big losses. The same is true for the longs that were using previous day’s low as a stop loss. So what will happen now? Will the market makers push the market down at the open to frighten any existing longs and those who have bought the extremes into capitulation, or will the shear volume of selling mean that it falls away at the open and continues down?

The market has already broken below the BNR at 12200 and the futures open. There are layers of support between here and 12042 but underneath there it is all white space.

1-month daily chart
3-month daily chart

Futures opened at 12211, leaving a gap of -202pts against the cash close and 230 against the futures close. The fututres open created an ex-gap of 133 against Friday’s low.

Physical/body

Sleep – what time did I go to bed? 12:15 and then I couldn’t sleep but I was excited rather than disturbed
How much coffee have I had? Half a medium pot
How do I feel? Pretty good, ready to play the video game

H4 and H1 charts from the morning futures session

Time stamp: 8:40
Scenario 1: finds support at 12200 and then goes up the fill the ex-gap at 12344
Scenario 2: sees a small bounce at the open up to S3 12268 and the reverses down all day for a low between 12111 and 12138 – almost spot on I over-estimated the first high (12247) ad under-estimated the low (12129)
Scenario 3: dips down at the open to throw shorts off it’s back and then sees a dramatic wave of buying up to 12344 and beyond

What the market looked like at the end of the session

M5 chart of cash session

PA during my trading hours

M1 chart of my session

Key points about today's PA and setups that worked

Classic washout action with a bounce at the open which reversed to new lows and then strong buying to recover 50% of the ON losses

  • opening PA made an HL vs. the futures session low
  • from there it was a straight move up to RES 1, with barely a pause for weekly S2
  • RES 1 set up as a 3Min Bolli and then a failed J-Lo
  • the move down paused at KLs but broke straight through SUP 1 to weekly S3
  • exceeded weekly S3 by 10pts and then made a reversal using a stair-step move with triangles and Imp/Corr structures at levels
  • after clearing weekly S2, the move accelerated and saw an uninterrupted move to the BNR at 12300 which was at confluence with the 50% of the ON move.

How effective was my Neutral Zone? The upper bound of the Neutral Zone was not in play; the lower was exceeded by arouund 10pts but it marked the LOD and prompted a huge 170pt reversal move.
How precise were my levels? SUP 1 wasn’t very precise – I think it was out of date by the open and should have been at the futures low and then SUP 2 drawn at 12138 – but since I had the Neutral Zone here, the level was still identified; RES 1 was spot on for the first high and RES 2 was spot on for the second one – so this was an excellent result

What I did

TOTAL = +10.1 R | # Trades 14 | Winners 5 | BE 0
Average R per winner = 3.5 | Losses > 1R = x | Scratched = x
R-multiples: trades 2:1 or more = 5 | trades 5:1or more  = 5

Outcome using standard TP strategy and same trades
2:1 trades (5R) + 5:1 trades (5 x 2.5R) + BE (0R) + Losses (-7R) = 10.5R
My results vs. SYS = -1.3R

ON TILT trades = x (x.xR)
Rule of 3 trades = x (x.xR)
Scratched trades =  2 (variance vs. rules = -7.8R)

Today's most gorgeous setup

With the 10pt pop through the level, this 3Min Bolli would probably have required two attempts, but with such a strong level, an overdone move in a hugely bullish context, it was a no brainer.

For reference: 6 month cash chart at COB yesterday

27 Responses to “6 May – Washout down to weekly S3 and then recovers 50%+ of the ON losses”

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