5.10.13

Friday, May 10, 2013 Russell Recap

Market Big Pic

Market open probability of closing the previous open gap was in favor of hitting its target. While this is not my primary trading methodology, the chase to close the open gap can make for a nice move off the open. After having closed the open gap and reversing, econ data was nill on the agenda today and nothing to wait for at the top of the hour. The 25 minute open range was the first setup after which 4 possible moves in the trading day were possible. The 4th of 4 momentum moves above the 25m open range was the best move of the day which coincided with the 1 hour range chart and hit R2 on 2 different setups. Using the combination of price action above the 25m open range and 10 tick range bar/heiken ashi candles on a 5/34 Exponential Moving Average would have kept you in the trade till the close.

Trade Setups

Setup #1

Setup #1

Waiting for the 25m Bar to close above the 25m Open range, I prefer to have at least 75% of the bar above. This was not the case. Second bar closed above the 25m Open Range and Heikin Ashi bar on trend chart was in trend to the upside. Entry taken. Being at new highs in the market, target was set at 2 ticks shy of the overnight high to ensure that order would be filled if we reached 970.7. Once target was hit, 1/2 contracts off and keep runner on. Price reversed and came back down inside 25m Open Range to Monthly R1.

Trading lesson: Wait for majority of 5m bar to close above 25m Open Range and watch Heikin Ashi/10 Tick range chart for direction of trend

Setup #2

Setup #2

25m Open Range momentum to the upside is achieved with a strong 5m bar closing above. This would usually trigger a buy signal for me. I prefer to watch the second bar form and price action to be above the high. What keeps you out of this trade would have been the Heikin Ashi bar on the range chart that had 2 tails. A solid blue body with tail upside would have continued the trend. Here we see price fail above the range and come back down inside the 25m open range.

Trading lesson: Even if the 5m bar appears to be strong above the 25m Open range, wait to confirm on second 5m bar and trend of Heikin Ashi bar.

Setup #3

Setup #3

Similar setup to the previous price action above the 25m open range. Price action moves above 25m open range on the first bar with the majority of thr bar under the range. Second bar closes above 25m open range with Heikin Ashi trend to the upside on the 10 tick range chart. Watching the action on the next bar, a long upside tail not in line with Heikin Ashi candle may have kept you off to the sidelines. Price action turned down with red Heikin bars following suit.

Trading Lesson: With a bar close above 25m Open Range, watch the price action of the subsequent bar and to be in trend with the Heikin Ashi candle. 5m Bar with upside tail is hands off.

Setup #4

Setup #4

BEST move of the day! Entry was everything here. If you followed the plan to watch the second bar price action after the 1st bar close above the 25m Open Range, your timing would be impeccable . As you can see, 4 bars did not close above the first bar above the 25m Open Range. Entering on the 5th bar (high entry) with 5/34 EMA Crossover and Heikin Ashi bars in solid trend up, would keep you in the trade. 

Trading Lesson: Wait for the second bar action above 25m Open Range. Optimal setup was the EMA crossover at the same time the first bar crossed above 25m Open Range and closed. WAIT for that second bar.

Setup #4a

Setup #4a

Looking for upside targets on the entry above the 25m Open Range, was R1 and Daily Fib target form the previous chart. Price action moved sideways on the 5m chart. Heikin Ashi bars were smoother and not as much chop. Price action remained above 5/34 EMA. Target was hit 8 times at R1 before market close.

Trading lesson: Momentum drive above 25m Open range, have your first targets set to take off 1/2 of contracts and move stop to B/E +1. Watch the EMA and as long as price is above, watch the Heikin candles and remove the emotion.

Setup #4b

Setup #4b

Additional chart to show price action to Daily R1 with 4EMA and 2EMA to keep you in the trade. Price aciton remains above all EMA lines.

Suri Pivot

Suri Pivot

Plotting the 1 hour open range, you can see that price action broke above just like the 25m Open range. This only occurred once during the trading session. Chop inside the range would have kept you out until momentum drove up. Target 1 was hit immediately  target 2 was achieved as the final target.

Trading lesson: Keeping a side chart of the 1 hour open range allows you to watch for momentum above the high or below the low in tandem with the 25m Open Range.

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