Anatomy of a Day Trade

Anatomy of a Day Trade

Here is a trade taken this morning (Friday, June 15^th).  We’ll see how this set up, was traded and it’s outcome.

Last night in my weekly Deep Practice program, I cautioned members that the weekly chart was looking weak.  The narrow range of the past four days didn’t inspire bullish confidence.  We discussed the weekly and noted that were the weekly to close at or under last week’s close, it would be a significant tell that the market could be about to react.  So, that’s my mind-set coming into the morning.  I’m bearish.

I note the Spring that set up right around the US open (at A), along with the slow, grinding pullback into support at B.  These events occurred around the lows of yesterday, represented by the dashed line (2772.25).  And the market starts to rally.

Okay, I thought, maybe I’m wrong.  Maybe we need to rally.  So, I sit on my hands and await further developments.

The market rallies into the 2777 – 2778 area (at C) and into the 10:00 AM timeframe, a time period which often sees reversals.

I expected the market to continue to rally and meet the objective of the tested Spring.  The first step in that direction is for the supply line (purple line) to break.  It does, but then problems erupt with the upside direction.  The market starts flailing and has an upthrust.  It also stalled and was unable to make a new swing high, despite the upsurge in volume.  This is not bullish behavior.  We short right after the test for a fill of 2776.75.

Now that we’re short, we want to see the morning lows — which are also yesterday’s lows — taken out.  The slide down started out like the previous down wave: grinding.  It then picked up steam and easily knifed through the support.  Since the market tried to rally off it three separate times this morning and struck out, we anticipated that the support would give way and break.  It does.

My target was 2765.  The market stopped falling just above this level.  The heavy volume and key reversal indicate the downside is likely over for now.  Shorts covered at 2767.25.  Done for the day.

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