Market Background
Day 3 in Cupertino and I'm flying back to Texas early tomorrow morning. Work up again at 5:30AM to see if the market presented a set-up before my meetings at 9AM.
The overnight and premarket continued trading in a narrow 18 point range (marked below) and spent most of the premarket in an even narrower range (marked below in horizontal black lines). This is a continuation of what I think is the market running out of steam as we've had 5 straight green days and stuck in ranges along the way to the previous ATH. I expected today to be flat and rangebound due to this being the last trading day of August + approaching Labor Day weekend. Checking the markets after work, this seemed to be the case.
I anticipate tomorrow to be about the same given it's the first trading day of the month and a Friday going into the long Labor Day weekend as the S&P barely moved with a decline of .15%.
On a side-note, last night I visited Michael Burry's old office in Cupertino. The old home of Scion Capital from the Big Short!
Enough jibba-jabba let's get into the action.
First Trade
After price action overshot deep below the premarket range around 9:48AM EST, we made a new low while still respecting the overnight low. Price action began bouncing back before another steep pullback that stopped mid-retracement and established a higher-low just below the 21EMA. You can see this in the chart below at around 8:50AM (my chart still shows CST).
It looked like the second touch of an upward channel confirming the slight upward bias while still in the lows of the trading range. We got a large green engulfing candle with a subsequent grind slightly higher. I counted this leg as the first entry long.
Next i got a large red candle that was rejected off the 21EMA and began looking for a 2nd entry long to take. It came quick so my entry looks a little lower than I intended but I got in with 2 long ES contracts.
Stop loss placed 1 tick below my signal bar, Take profit on contract 1 placed at 10 ticks and the 2nd take profit order placed far higher to act as a runner. I'm slowly testing the waters with adding a second contract.
The first contract hit my target at a $125 profit (10 ticks or 2.5 points). Screenshot below:
Once my 1st contract hit the 10 tick take profit, I moved my Stop Loss to 1 tick above my signal bar to insure I at least keep a tick of profit should the market reverse on me. Well, I got a slight runner which I trailed behind. I know generally I want to let these runners ride for 5-6 points but since I'm new to this I decided to trail more aggressively to make sure I wasn't leaving as much on the table should we get a violent reversal.
My second contract was reversed off the peak and I was taken out at a $100 profit.
Next week I'm going to play around a little bit with how I trail my runners. I want to get more systematic about this. Generally I try to trail 1 tick below the latest closing bar but I'm thinking of changing this to just a flat 6 tick trailing stop.
Summary
- 1 trade with 2 ES contracts
- 1 winner, no losers
- 100% win rate
- $219 net profit on the day
