Thanks to Wyckoff! Over the past two days we have had two very nice Wyckoff Springs in the intraday S&P futures (symbol ES) market. The first – yesterday – occured right off the US open. The second – today – came in a little earlier, about 8:15 AM Easten Time.
Both Springs acted as expected. That is, they led to a swift rise in price. Springs are one of my favorite long-side trades.
The basic idea behind a Spring is that price breaks through a support level, but lower prices quickly get rejected. Buyers see this and enter with aggresive buying, driving price rapidly higher. Because of the rapid rally, we know almost immediately whether or not the trade is working – a clear side benefit to this trade setup.
Not all Springs are created equally. Typically, Springs fail when the market is trending down. An exception to this rule-of-thumb occurs when it is reasonably clear that the downtrend has lost steam or is in an oversold position, as is the case with the first Spring on the chart. Nevertheless, Springs taken in a downtrend have lower odds of success and require careful trade management.
The second Spring is a “gimme” trade; it has high odds of success. Why? Because we are trending up making higher highs and higher lows. The momentum is to the upside. Thus when lower price get rejected in this market environment, it serves as a confirmation to buyers that the train is about to leave the station; it’s time to get on-board!
Springs occur in all markets and on all time frames. You can learn the fundementals as well as all the nuances of this important trade setup on the video tutorial available here: Wyckoff Spring Video Tutorial. This is a two-hour video with over 50 charts dedicated to this one trade setup. It is a tour de force on the Wyckoff Spring.
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