ES Update: Keep It Simple
Stupid Series (The Final Battle Part 2: Nailing the coffin)
[If you haven’t already, you must read the weekend post to
understand this one]
Today’s session was quite easy after bulls triggered above 2034.25
(yesterday’s high) as the 2054 immediate target became active once again. This
is exactly why it’s called a bull train until it proves otherwise as
yesterday's session turned out to be a great bear trap that provided today's
huge feedback loop of squeezing higher.
The intraday bull train really started before the day session had opened;
the 8AM hourly bull bar rallied from the 2014.5 lows and closed at 2020.5.
Which was above the 1HR 20EMA resistance and a hair below the 1HR 50SMA+100SMA.
When the day session opened, the market quickly showed its true colours as it triggered
above 2034.25 and confirmed the 2054 immediate target.
We hopped onto the bull train with a 2034.5 buystop trigger and
took profits at the 2040 and 2047 minor resistance levels. At roughly 1PM, we received
an hourly extreme overbought signal that was at its maximum peak similar to the
Sept 17’s Fed day high. This provided us with two quick bear targets of 2035
and 2027. As noted, the first try at 1HR 8EMA/20EMA (2035, 2027) generally
results in a quick BTFD day trade due to the sheer size of the rally from the
morning. Subsequently, hourly sticksaved at the aforementioned 1HR 8EMA target
and closed as a large bottom wick bull candle. By the end of the day session,
it fulfilled the 2054 target exactly at 4:14pm.
What’s
next?
Daily closed at 2055.75 as a perfect bull bar and this is slightly
above the daily 200SMA.
Sir, are
weekly+monthly bears nailed in the coffin yet?
From our weekend update: for
us to consider weekly+monthly bears to be nailed in the coffin it would be a
close above the 2054 daily 200SMA.
They are not considered dead just yet. Since tomorrow is Friday
and the weekly closing candle heavily depends on it; we are going to give it one more day for bulls to prove their strength
by having two consecutive closes above the daily 200SMA. The reason being the
78.6% fib retracement resides at 2069.16 (afterhours high = 2061.75), which
means that it is still possible to have a buying climax top tomorrow. If price
goes above the 78.6% retracement level, then it generally results in a 100%
full retracement (2134) eventually based on our trading knowledge. There is
also 6 sessions left for the monthly candle, which means there’s still a chance
for bears to close it with a top tail.
This means that if bears do not close below the daily 200SMA
tomorrow or reverses half of today’s gains, then it is most likely game over
for them. The coffin for bears will be nailed in fully.
For bulls:
If ES triggers above 2070, the bull train intermediate targets are
2089.5, 2103.75 (August high)
For bears:
They need to retrace back to 2032 which is the 50% of today’s
perfect daily bull bar to prove they are not dead.
---
Daily
extreme overbought signal update:
We posted this DAILY signal a couple sessions ago, it is now approaching
its maximum peak region vs historical highs. Note, maximum peak does not mean
that the market has to go down. It just means that it’s a great risk vs reward
trade setup signal that needs to be confirmed with a price breakdown. As the
market could go SIDEWAYS and slowly grind higher to work off this signal. For
instance, last year on November 19, 2014 this signal started appearing. The
market only turned around December 8, 2014.
(I did not keep a track record of the executed daily signal win rate,
but the executed win rate of the extreme hourly overbought/oversold signal is
80%)
Lesson
time:
Overall, today was a great session that highlights the epitome of
unconfirmed bear targets and how impressive bull trains are in a bull market setting.
It also demonstrates why we are not great swing traders as mentioned
previously. For instance, we entered the OTM swing puts too early without a
price confirmation. This is exactly the reason why our swing account only
represents 20% of total trading dollars and the day trading account represents
the other 80%.
---
Our Swing
Position:
·
Added 10% shorts in Dec Monthly ITM Puts
·
Added 10% shorts in Nov Monthly OTM Puts
·
Total = 80% swing shorts (65% Dec ITM, 15% Nov
OTM)
Plan: Depending on how we open tomorrow and during the first regular trading hour, we shall be exiting/taking losses on the OTM puts. For the December ITM puts, we will decide to reduce our position to half or fully depending on whether the daily closes/break above daily 200sma/2069/break low 2032. There are still lots of possibilities, so we need to see how we open first. Overall, looking at the paper losses in the swing account; it is not too deep so our day trading profits from this week still net us in the green.
