The Battle of Different Timeframes
Today’s session was fairly simple and straight forward once the market opened on Sunday night; the hourly extreme oversold signal was quickly confirmed by 7PM. We covered our swing shorts and went long at 2001 before the signal even confirmed since it fulfilled the immediate target of 2000. The trade had an initial risk of 5-7 for 15-20 points up since we expected this as the Leg 1 of the deadcat bounce. When we woke up in the morning, the sell limits at 2017 and 2025 were filled.
Just a few minutes before the day session had opened; the market tested Friday’s close line of 2013 and the bulls sticksaved on the 15m chart. We went long at 2015-2016 for the Leg 2 of the deadcat bounce potential setup. At 12pm, the hourly chart had a bull sandwich setup and subsequently the next hour it broke out and squeezed. Overall, today’s session was just a textbook 15minute 8EMA bull train that provided great risk vs reward scalps and swing trades.
What’s next?
Daily closed at 2048.75 as one of the biggest bull engulfing candlesticks of the year. It was also sticksaved at the daily 50SMA and closed back above daily 100SMA. However, it is still below the daily 8EMA, 20EMA and 200SMA which is where swing bears are looking to reload their short positions.
As previously mentioned, the immediate target of 2000 was fulfilled and the market provided us with the expected deadcat bounce. Since it’s a huge bull bar, we may get a small continuation of upside tomorrow or/then the most likely scenario is an inside bar range bound shakefest tomorrow.
Why does tomorrow favour consolidation?
The hourly extreme oversold signal is entering the region of hourly extreme overbought. This means that bulls only have a little more juice left for this deadcat bounce, so it’s very likely to be a range bound shakefest tomorrow. In addition, major resistances such as daily 8EMA,20EMA and 200SMA are hovering at 2053-2058.
The immediate target is back to 2035-2037 and 2025 as long as price stays below 2058.
If above 2058, then this deadcat bounce could extend up to 2067.56 which is the 61.8% fib retracement. Currently, 1HR 200SMA is hovering at 2069.82.
Tomorrow’s day trading game plan
Our current plan is to trade using smaller size tomorrow in order to protect profits from a high probability shakefest day.
The daily bear train setup context and swing trade re-short setup potential
Remember the context of the daily bear train rejection of 100+ points from the high at 2110.25 to 1998.5 low, swing bears are going to be re-shorting here from 2045 to 2068. If the bears let the bulls get back above above 61.8% fib retracement then this bear train would be deemed too weak and something else is playing out. If the bears are going to get a daily bear train Leg 2 down, then they must show a strong rejection from 2045-2068. This week is very important as it will very likely determine how the intermediate term swing perspective roadmap plays out.
