We worked off our Overbought conditions through sideways price behavior (as opposed to retracing lower). Today's SPY trading was an nr7 (narrowest range of the past few months actually), also on the lowest volume of the year, but it did need the time to digest previous gains.A trade I didn't make today, but want to keep in mind for future reference is fading the highs of the day on such a narrow range day following a trending move of the previous day (or days).
Later in the day (just before 2pm) we tested the highs which coincided with a break through the keltner channel. In a day other than a z-day we could suspect this move to be an impulse move to the upside and look to get long. However, being that this day was a suspected consolidation day, the higher probability play would be to fade the highs of the day. As such, we had the breakout through the keltner channel (high of the day) and volume came in (dots, above/below candles), selling price back to our pivot point. It's tricky in the sense that our momentum indicator is showing a higher high, and the pattern looks like a bull flag setting up. But if you are suspecting a bull flag you would be waiting for price to close above the flag "pole" for one. So while you're waiting for this flag confirmation you start to see price testing down, rather than up and we get the lowest close over the last three bars, you can then suspect that the volume you see is actually selling, not buying.
Anyway, there's no guarantee we'll make new highs next week, but things are shaping up for a test of that $96 range. The market profile shows how we spent all day establishing value in this narrow range:A trade I did make today involved FAS; can you pick out the high probability trade in this chart?
The setup on this chart allowed for a very tight stop, right below a narrow consolidation point that came after an impulse move, here's a closer look:
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at email@example.com
I am always open to questions, comments, or suggestions on how to improve this blog.