1d:2m
-There was 1 clear setup today and it was a trend continuation to the downside move. I love this setup and I usually trade it well but for some reason today I was caught in many spikes to the upside and my stop was hit just for me to watch it come right back down. There are a few reasons why this setup was tricky but also a very clean opportunity IF 1 thing happened.
-We are approaching this major resistance on the daily. These opportunities have only happened 2 other times this year and when shorts win in this zone we see MAJOR moves to the downside.
- The 30 minute chart is putting in a very nice fakout top where we spike higher, fakeout and selloff all in one big move then we continue much lower from the initial supply zone.
-We had a major move lower last week with an insane reversal back to the upside which was being sold into very strongly once we had data this morning at 10:00. We have seen tons of big drops get eaten up the whole way back to highs but since this was layered within another larger drop from the previous day where we hit 410 and failed massively, this is a much cleaner attempt to take a short continuation through the lows of friday.
Now that we know why this is a very clear setup to the downside, how do we trade it?
-Every blue box is an area where we could potentially enter for the continuation to the downside. I took all of my entries (3) right inbetween the first blue box on the left and the second one. I was chopped out of all of my trades and had to stop trading so I didnt keep bleeding. If I had been more patient I wouldve waited for the retest of the market open volume. If you see the white large rectangle that represents where the majority of volume is at on the day. Right at the open was the perfect setup for a lower high and I was too impatient to wait that long for the breakdown.
Scenario 1:
- Lets say you were able to wait for this ideal entry. (red box entry short, Green box exit 3/4 position)
- You want to enter the starting position right at the break of a new high which could be possibly 1 out of a predetermined 3 or 4 contracts. Add into the trade once we break the uptrend and then take profits at the break of a previous higher low.
- The problems with this strategy is that you would have entered on every single other previous high and you wouldve lost a lot of money on this so how do you know that this high is the one that you should take?
- The true entry where you put size into it is the break of the trendline because we are already so deep in a downtrend and once the trend is broken to the upside and that break coincides with the hold of the downtrend aka 'Creating a lower high". That last spike then fail is the definition of a lower high because to the left we see a high of 404.92 and this high was at exactly 404.00.
Why is the setup so tricky?
- You have to wait a very long time when going for the true break of this area. That is the main reason why its so tricky. We have a clear downtrend the more you zoom out of this setup and on the daily we have a massive downtrending line that should be expected to make the market move a lot lower. There is no doubt that this area will be hard to trade because bulls wont give up with a fight but we have Hikes and CPI on the 13th and 14th and I could definitely see us just holding up in this zone for that day where we see a massive move in a direction unknown.
