The last two posts (you can read them here: A Lesson in Trading and here: Follow up to Yesterday’s A Lesson in Trading) I’ve been discussing key levels and the kinds of trades that set up around them. Frequently, when these levels are revisited and especially when we come back down and go through a key level (or rally up and through the level), the market will offer another trading opportunity right around that level. This occurred this morning.
Back to the Key Level Again
The level we have been trading around is 1499.25 (or, more generally, the 1500 level). We selected this as it is the weekly high from two weeks ago (week ending January 25). We have seen several good trades set up at that level in subsequent days.
How We Could Tell The Downside Today Was Likely
Today, the S&Ps were unable to hold last week’s high (1510.50) put in on Friday. In the Asian and European sessions, the market put in a lower high and traded decisively through Friday’s closing price. Volume on the Weis Wave was telling us in advance that further downside could be expected. The question became, Where do we find a short trade?
The Trade
As the market fell back through the 1499.25 level, it made a feeble attempt to hold. That was just enough to set up a short trade as the market failed to rally higher, falling through the highs of the weak rally attempt in a minor Up Thrust, as you can see on the accompanying chart. Target? Another key level around 1491.25. I’ll encourage you to figure out where that was put in.
How to Develop This Skill
Levels in trading are so important to understand. We discuss these each week in Deep Practice, where a group of traders meet weekly to develop their chart reading and trading skills. This is a form of deliberate practice, the well-researched science of developing expertise and mastery. I don’t know of anywhere else that you can get this kind of training. Sound interesting? You can learn more here: Deep Practice.
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