Market Structure & Background
After yesterday's range day the market finally showed some movement -albeit to the downside. Overnight market was downward trending but it wasn't until an hour after the open that we saw a violent downtrend in play taking the S&P from a high of 4503 to the daily low of 4447.
Once I got to the office, I didn't really have time to trade the downward sloping trend due to meetings so I got to a quiet place during lunch when the market bounced off 4447. This was a strong retracement into a tight range that continued for about an hour and a half (see first horizonatl range in the screenshot above).
I made the mistake of loooking at the 500 tick chart instead of 2k tick chart and took a 2nd entry long on the 500 tick chart instead. I typically trade the 2k tick chart during regular hours. Once I realized my mistake, I immediately scratched the trade for a 1.5 point loss ($75). Won't make that mistake again! Not a problem, I can recover from that lesson.
As the afternoon continued, price action convincingly broke out of the aforementioned range. After the convincing breakout, the market chopped around a bit here at the range highs. I am still not quite comfortable fading breakouts on shortened ranges so I waited for 21EMA to make a determination if this retracement was going to continue or reverse once more.
Around 12:45PM CST it appeared that the high of the first range was claimed as new support. I began looking for key entry points along the shortened trendline above 21EMA. The 21EMA was angled steeply upwards so I had little doubt about the current market structure looking for a new high.
I got a 2nd entry long off a pullback that fit my ideal set-up in the screenshot below at 4463.50 .... I took the trade going long and waited as price action slowed down and we chopped around for about 20-30 minutes before we started getting another upward move.
In retrospect, i identified that we were in another congested trading range slightly above the first one. I drew this in the screenshot above. However we finally got a sustainable breakout to the upside. Once price moved 2 points into profit I moved my SL to breakeven and began trailing the candles by 6 ticks to give the trade room to breath. I was taken out at 4469 for a total profit of 4.75 points or $275 compensating for my mistake earlier.
After this trade I called it a day and just watched price action reverse back below the 2nd trading range into the close.
- 2 trades
- 1 winner, 1 losers
- 50% win rate
- $194 net profit on the day