The Price Sandwich and Impending Breakout
Today’s session was another shake fest/consolidation range bound day, the
day session range was only 10.75 (2053 vs 2063.75). It was a little better than
yesterday’s 8 point range. As previously mentioned in our weekend and Monday
updates, the market had a possibility of just consolidating until Wed Oct 28
FOMC announcement in order to trap more traders in from both sides. It also
burns off more premiums in options and it lets the moving averages catch up for
the bulls.
For our strategies, we’ve found that the highest probability trades on
shake fest days are from 8:30 to 11:30am or when a day session starts at 9:30 to
11:30am. However, we did not honour that rule today like what happened on
Monday and that was to leave our trading desk at 11AM when it confirmed a shake
fest once again. Today, we stayed for the whole day as we were lured in by the
market action and into a couple shake fest setups. As a result, we overtraded a
little bit compared to yesterday’s quick morning bank robbery easy money. This
goes to show that not everyone can be 100% everyday, it happens.
What’s next?
There’s 3 sessions
left for the monthly candle closing.
Daily closed at 2063.75, this is 4th consecutive close above
the daily 200SMA. Also, it closed as a dragonfly doji candlestick – this means
that price went lower intraday but bulls manage to sticksave it by the close.
Ultimately, it means that bears lost the fight of the day.
Tomorrow is FOMC announcement so we should get the usual catalyst for
large price fluctuations when 2:00PM hits.
As long as the bull train remains above 2050, the immediate targets are
2089.5, 2100 and 2107.
Here are our current execution levels for the great risk vs reward
trades for tomorrow.
Trigger above
2074.50, immediate targets are 2089.5, 2100 and 2107.
(Buystop at 2075.00, stop at 2065)
For bears:
Breaks below 2050,
the immediate targets are 2042, 2030 and 2020.
(Sellstop 2049.75, stop at 2060)
Note, the bull train dip buyers today had a chance to buy from 2051.75
LOD to 2057 for the 2089.5 target as 2050 was the hard stop of the day.
Price Sandwich and
Impending Breakout
ES is being sandwiched between the supports of daily 200SMA and the Aug
28 to Sept 17 trendline versus the major resistance of 2069.16 (78.6% fib) and
the yellow major downtrend line from July.
Will we get a bull spike breakout and then a
quick bear reversal to confirm our daily extreme overbought signal setup? We
shall find out the answer very shortly. As always, price is king and signals
are just potential setups that require a price confirmation.
Roadmap and thoughts:
Generally speaking, from trading various instruments over the years
we’ve noticed that when a retracement on a daily chart closes above/below 78.6%
then a full retracement to the 100% becomes very likely eventually. However, we
do not have the relevant backtest system to prove this in a statistical manner.
Bulls really need to close above 2069.16/2070.
The first try at Daily 20EMA is a BTFD setup
Even if bears manage to reverse next week or within these two weeks;
daily bulls have a first try BTFD setup at daily 20EMA setup just like how
first try hourly 20EMA was a BTFD setup during Friday’s day session. We count
this rally from the 1861 vs 1861.5 hourly bottom to 2065 as Leg 1. The bounce
has never had to retest the daily 20EMA yet, but retested the daily 8EMA 3
times and bounced off it. This means it has been a massive bull squeeze run
that the very first dip to 20EMA should sticksave. However, just because first
try BTFD at daily 20EMA is a great setup ,it does not mean it has to be a daily
chart scale bounce (50-100 points). It could just be an intraday 20-30 points
bounce then retest the daily 20EMA again if bears manage to have that much
conviction.
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Our Swing Position
- Nothing has changed
Total = 20% swing shorts (Dec Monthly ITM Puts)
