Reference
Micro Timeframe: Uptrend
90d:1h
Intraday: Uptrend
1d:2m
- Why uptrend? is we have a massive move to the downside? The intraday is always in an uptrend so long as we are holding above the opening price. Yes we did get below the previous day close multiple times but as long as we hold the open price we are still uptrending.
Trades
Futures:
1st, 2nd, 3rd Trades: Micro Reversal Intraday Reversal
1d:5m
- Firstly let me just state that this price action was fucking nuts. At the open we just rocket higher on big volume and breakout a full 25 points in about 40 minutes. That is some serious momentum. Then, seemingly out of nowhere we started to selloff 2x as fast as the entire opening push move. We broke below the opening price near the low of that move and I was stalking this for a potential spot to get in for a lower high. After such strong sell momentum that did not pull up one single time, youd expect the move to continue lower after the intiial selloff right? WRONG.
- 1st Trade was slightly premature but given the strength of the downmove I was not expecting a big bounce since sellers were probably ready to just continue selling. Took a tiny 3 point loss on this but then right after I do my cardinal sin. I re-entered at the same exact spot. This is dumb for 1 reason and 1 reason alone. If I get out and get back in in the same exact spot I am doing nothing other than adding fees to my already shitty trades. I took 2 trades where I couldve just taken 1.
- 2nd Trade I reenter and stop out on the break through yesterdays high which I think was a good spot to stop UNTIL I reentered AGAIN in the same exact spot. So this was my 2nd re-entry in the same exact average on the day. Not good.
- This was the true trade that made sense. I held for a planned 5 point stoploss. Had I hit that I woudlve lost 50$ on the day and I wouldve been done. Once the SPY started to move in my direction I was looking for a spot to add to the winner. I was up about 3-4 points before I started to add. This is a great lesson in adding to trades because on the first 2 trades (albeit they were not good) I was wrong about direction and I cut my loser. I did not add into the first 2 trades and end up losing big simply because I was wrong. I added into the 3rd trade because I was right (initially). On a nice spike higher I got in at my exact average and I successfully managed adding 100% more to my position without moving my average at all which is pretty nice. We got a significant move lower and I was up 7 points on that first drop. Right after that drop we spiked higher and retested my entry. The fact that I did not sell in this spot is very good to me. I had a plan to stop out for a 2 point loss from my entry (which was a new Higher High on the downtrend aka the structure is dead for short continuation) and I stuck to that plan perfectly. I did not panic exit there and I kept my composure even though I just went from +$70 to breakeven very quickly. I held again and was waiting for us to retest a lower low and this is where I made a crucial mistake. We did make a lower low after consecutively making a lot of higher lows and this was very nice BUT the moment we made that lower low, the SPY did not continue and started to grind back up again. This is a key moment where I needed to pay more attention to the price action and see what was occurring. How would I have known to take the profit here instead of a test of the LOD?
90d:1h
- See the long white trendline on the right side of the upwards channel? That is a level we hit 3 times already before this last lower low that I am talking about.
5d:10m
- These 2 spots (A,B) were the key zones that I should've been paying more attention to. Spot A was the initial massive drop we had out of nowhere right at 10:30am. This was odd for many reasons but that is beside the point. On point A we hit the 1h trendline and bounce perfectly back up to VWAP, PDC, and Yday High. On point B we made that lower low where I shoudlve exited my trade.
Reference
1d:5m
- This is (A)
- Had I actually exited in that spot which was a clean attempted lower low FAIL and clean 1h trendline bounce, I wouldve made $80 on this trade. Instead I ended up losing $20.
- Yes, getting out of this trade without my target or stop being hit is NOT part of my plan and I am very happy I stuck to the plan. Something I need to spend more time working on is WHEN DO I EXIT THIS TRADE? This is a very important question because the value cannot be based on any $ amount or any point amount. I need to follow technicals that tell me when it is time to get out. Today I ignore a 1h trendline even though I had it drawn for hours before I was in this trade. I also did not trust the fact that we attempted to make a lower low and immediately got bought up.
Bookmap
1d:2m
- You can see this large sell order that was sitting right at that lower low attempt and we immediately got bought up and consumed that person. I dont think I wouldve seen this in the moment and thought that but looking back this seems like a nice tell.
Offensives Sector ETFs (Left to right) Discretionary, Tech, Communication, Semiconductors
- At 1:55pm (my last chance to exit my trade for a profit) all of these tickers were no longer consistently breaking to new lows. When Offensives are not breaking to new lows and we are in a downtrend that is a sign that sellers are exhausted. At least one of these ETFs should be making a new low as the SPY is attempting to do the same if I think momentum will be strong to the downside. Another subtle but effective idea behind knowing when to get out of that trade.
What was the best trading opportunity of the day?
Both of these scenarios seem extremely unlikely for me to catch besides probably the long trade after we held the 1h chart. Lets see what we can come up with though.
1st Opportunity
How do I catch this?
- Firstly, unless you have a damn good reason and I mean really damn good, this is an awful trade. If you short the frontside like this you just lose 9/10 times and you are basically trying to time a reversal. Was there anything possibly saying that this would happen and that buyers are really not as strong as they seem?
Sector ETFs
- Something very interesting was happening at the open on these ETFs. If you look at the bottom (offensives) they were relatively flat at the open with movement towards the previous day close but also stuck below that level (except XLF which is financials). The study below these ETFs is called Relative Strength. This study shows you in relation to the SPY, how strong is this ticker? When the value is RED is is weaker than the SPY and vice versa for green. The relative strength for all of the offensives (bottom row) at the OPEN (specifically at open not for the entire day) were pretty negative. Why is this weird? When you have strong upwards moves in the SPY, that means that risk is being put on. When risk is being put on people buy offensive stocks such as NVDA, AMZN, GOOG, NFLX, etc... That means that since the SPY was moving up 25 point at the open why are these offensives having very weak relative strength? They should be strong, not weak.
- Now if you look at the top level (defensives) they were being bought up pretty heavily at the open. XLP was above PDC and ripping higher. Utilities (XLU) were down big at the open but then bought right back up the second it hit the lows. Healthcare (XLV) was also veryyy strong at the open and way above the PDC. Volatility was also increasing heavily at the open (UVXY) as well as Gold (GDX). Again if you look at the relative strength they are pretty heavily green besides the Utilities ETF because it opened the day so weak.
What does all of this mean?
- To put it simply, this upward move at open was NOT supposed to happen when the sectors behave this way. If the move was going up from the buying of defensives and the holding of offensives then that meant that the second offensives start to not be extremely strong, the market will push lower and it will do it fast. If all offensives are relatively flat at open and the market is pushing high then the moment it loses momentum these offensives will start to sell off because again, if the SPY moves higher institutions buy offensives so why are they selling offensives and buying defensives?
2nd Opportunity
- This trade seems like a lot more of my style. I would have to had noticed that we bounced off the 1h trendline first and then that couldve possibly given me an idea that maybe we will just continue to go long. Once we retested it I wouldve had to go long and risk a large amount of points. If I had risked the previous low on the day that would have been about 7-9 points away depending on how good my entry was. I wouldve then had to hold this trade and wait for a spot to add to my position and then not stopout once it retested my entry. This trade is extremely extremely difficult to take and even more difficult to manage intraday. Adding there and not stopping out would be hard but in general I think this is probably the best opportunitiy of the day to get long and hold for a true move that is bigger than 15 points. Realize though that I did not put an entry on the first test of the 1h trendline. That is buying a massive downtrending move that happened very fast and if you do that often you will get destroyed lol.
Takeaways:
Yeah I lost $50 but I did some things that are very important for me to grow as a trader. Firstly, I made a plan and I stuck to it. I didnt panic exit when it turned against me and I didnt panic sell when I was up only 4-6 points. Secondly, I added into a winner once I was proven to be most likely to win. I didnt add into the first 2 trades and take a big loser when instead I waited for a trade that I was already green on to add into. I also did a few things that I shouldn't have done. Firstly, I re-entered 2 trades back to back where I got out and got back in at the same average price. Again, this does nothing but make 2 trades out of 1 and I simply just pay more in commissions. Stupid. Secondly, I did not exit intuitevely when the SPY made an attempt at a lower low and recouped it nearly immediately. This is something I would need a lot more experience in before expecting to be able to do it but I think the 1h trendline is enough of a reason for me to just take my profits. Yeah could we break that level and move down 100 more points? Sure. But, when we bounced 2 times off of it already then its time to take the profits. Only other thing I need to do it pay attention to bookmap more and see if I can spot little nuances like the one I sent above that could signal me that its time to get out of the trade.
