Sunday, May 12, 2013


ES had a balanced day probing both initial support and initial resistance. (1)  Es opened at 1625.25 & traveled just over the back of the 1624.50 to 1626.50 WHITE ZONE.  The WHITE ZONE determines who has control; buyer above & sellers below.  Buyers tried to push above the WHITE ZONE & TAKE control but failure to close above the 1626.50 on a 5 minute bar left sellers in control.  Sellers were able to push to 1623 & was sufficient to take 2 points+ per the high odds strategy no matter where a trade was taken in the WHITE ZONE.   of into the bottom of the WHITE ZONE and probed to the top of the zone before reversing lower.

(2) ES got a  little tricky form here.  When the market is in balance the best was to trade it is from the outside in.  The middle will have a tremendous amount of chop & is the worst place to enter a trade. The WHITE ZONE was the highest volume area Friday for the second day in a row.  It is a rare occurrence & this area should be noted as a place to stay away from entering trades. That being said buyers were able to push & close above 1626.50 G a buy for the high odds strategy on the first dip back into the WHITE ZONE.  The push down had no rotation up & fell through the zone & stopped out the trade for -3 (again, this trade is for education purposes & not a trade recommendation) 

(3) Sellers pushed down to the 1622-1620 Initial Support.  I expect buyers to materialize at the first touch of Initial Support. Responsive buyers stepped in at the zone and quickly drove ES back into the WHITE ZONE. Because this was the first touch back into the WHITE ZONE after it was broken on a five minute bar, a sell signal was generated.     

Again,  this zone became the high volume area of the day making trades difficult.  Depending where the trade was placed; the front of the zone would produce a stop to the tick as the model calls for a 3 point stop.  Taking the back of the zone would produce a successful trade as buyers were unable to maintain control.  Two stops in a row shuts down the trade strategy.  My spread sheet tells me its rare to get two stops back to back & there are too many good days to risk taking a big draw down on any one trading day.  Again,  I trade multiple strategies & am simply highlighting the possibilities of trading just 1 high odds strategy.  That being said,  there are many ways to cut this cake.  

4  Sellers stepped back in at the top of the WHITE ZONE.  This is a perfect example of why I suspend the strategy after 2 back to back stops.  The move & close above the WHITE ZONE on a 5 minute would trigger another buy signal.  had it been taken a loss would have resulted.  No trade was taken.  Sellers pushed ES all the way back down to the back of Initial Support.  Again,  I expect strong buy responses at Initial Support & the back of the zone offers the highest odds for a counter rotation trade. I mentioned on twitter that the back of the zone offered excellent trade location & ES stopped at 1620 to the tick.  In addition,  1620 was a 7 point rotation down from the previous swing high and equal to the largest down rotation of the day.  Add to that that 1620 was the prior days low & this occurred on a low volume push during NY lunch & it was a powerful set up & a low of the day. Its simply very difficult to find a better confluence for a better set up.  It was the low of the day!  Just doesn't get better. 

5 Responsive buyers stepped in and again drove the market back to the 1624.50-1626.50 WHITE ZONE where it spend the better part of two hours chopping around in a tight zone before being driven up to the 1630-1632.50 Initial Resistance where buying was shut off to the tick.(6)

A couple of closing notes, 1,  I did not expect a tight balance day but as soon as I recognized something was not right I shut down a strategy which would have had several more losses through the course of the day.  The two stops back to back was important market information & I value that information.  the highest odds way to trade a balance day is from the outside in & avoid placing a trade in the middle where it will be extremely choppy.  It was a difficult day overall & over-trading probably resulted in large losses.  

I will be careful to not take a trade in the 1624.50-1626.50 range  & wait for the area to be resolved.  If we are going from a directional market to a range market--& I dont know that we are;  I want to focus on trading from the outside in & avoid the middle.  The quicker you can recognize a potential change in the market the quicker you can avoid taking unnecessary losses.  Hope all had a good week.  Tomorrow new opportunities await! 

Notice: This Blog & its contents are intended to be for educational purposes only & not to be construed as trading recommendations  in any way.  You should not follow anyone blindly.  Trading Futures & Options on Futures involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions are subject to change at any time.



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