I’ve seen strange days on the market but must say this was at the top of them. Watching the econ data on the pre-market open, with nothing but poor data, would be watching for a market short. This in no way would change my entry based on my rules, but would be watching for the bias to the short. This means an entry under 25m Open Range, with support on the Heikin Ashi Bars Range chart and poor market internals. Keeping in mind that at all time highs, the market bulls will do what it takes to keep this up.
While several opportunities presented themselves based on my rules, I watched the market internals for confirmation of my entries. I don’t wish to call it a gut feeling, but the sum of all the parts just didn’t add up. Yes, you could say I missed several entries for 10 ticks here and there, but today I wasn’t wiling to risk it. Not taking an entry is also trading.
The AD line started the day off on the negative side which prompted me to think that we were heading south. $TICK was under zero and Market Breadth (UVOL/DVOL) was mixed. It is this precise measurement of the Breadth that held me at bay. NASD had a ratio of 3:1 and all other indicators in the red, couldn’t see myself entering. The AD line wavered most of the day until late in the session where it sank towards the same levels it opened with. Breadth was flat the entire session until the last 1.5 hours. By this point all entries were off the table for me as price action remained within the 25m Open Range until the last hour.
Trading Lesson: Regardless of my setup, unless market internals are following suit, I’m sitting on the sidelines.
Waiting patiently for the 25m open range to settle, price action topped off with a 5/34 EMA Crossover at the top of the range. Daily/Open gap was tapped with confirmation of direction on EMA crossover. Market Internals not playing along.
Price action turned and considering my bias to the downside, was looking for an entry under the 25m Open range. Heikin bars were in downside trend signal. Will wait for second bar to form. I will admit, I questioned whether I should have just entered on the first bar closing under the range. Experience and discipline told me to not take the trade.
Everything should be a go…right? Two bars under 25m open range. Heikin bars in the red. Oh wait, turning blue. Market breadth is still 3:1 on the NASD. What the heck? Philly Fed data was in the hole and we are going up? NO TRADE!
Sure enough, it turned. Of course I could have grabbed 10 ticks on the way down on the first bar crossover. Not my trading plan and market internals were not supporting the direction. Including a FLAT Breadth.
Price action returned into 25m Open Range with Monthly R2 as resistance.
Note: While I do watch for the EMA crossover as an indicator of trend with Heikin Candles, inside the 25m Open Range was not ideal. Even though this played out upside for 60 ticks, if you just trade on the crossover, you will get chopped up.
Nothing but chop inside the range. At this point, I was watching for the 1 hour open range to close. Once the 1 hour open range was set. Price action above 987,3 would be momentum. Weekly R2 was a target depending on the closure of the first bar. Price action was also hanging to the daily gap/pivot with flat market internals. Not sure which way the market was headed today.
Sure enough, first bar to close above 25m Open range with confirmation on Heikin range chart, closes near the high at weekly R2. Market internals improving, will watch for second bar close.
Looking at my Camarilla chart, second bar taps H3 and turns down. Not good enough for an entry yet if we are headed up. At this point I have to ask myself what is going on overall to keep this up. Didn’t matter, I was sticking to my trading plan and no entry was my decision.
5m bar closes up above 25m Open Range above the previous high. Heikin bars in trend. Why don’t I take the trend? $TICK bars are all hanging tails upside.
Price turns back down. Heikin bar still in uptrend. Why not take the entry? Putting all the pieces of what has happened in the market so far until this point didn’t add for my style of entering a trade. You can say I hesitated a bit, however the only thing that was going to get me in this trade was if price no cleared this hurdle of the Weekly R2/Camarilla H3 and market internals were soaring.
Looks good…huh? Price pops to the fib retrace target. Hanging tail. Not going to happen today. At this point I felt I was passed enough the 25m OR to not enter and the Market Breadth was flat as a pancake, I would sit the day out. Of course, option to fade off the fib 900 target was a possibility, but I didn’t trust the market pulse today.
Market conviction on the 1 hour open range chart (bottom right) was chopping along but did hit R2. Nothing was convincing me that this was a market I wanted to be in today. Throwing up a fib extension line I also noted that we had hit the 127 level. 25m open range kept me at bay and as saved me a plenty of times from being in the wrong trade. Yes, today the fib extension with EMA crossover would have worked out well without the range, but that’s not my plan.
Only way I was going to get back into the market is if price broke under the 25m Open Range which occurred with 30m to close. A trade that would have also turned out 10 ticks but I tend to stay out of the market in the last hour unless already in a trade prior.
Additional chart that I watch include the 5/13/21/80 EMA which had a wonderful setup at the post 1 hour mark where all 4 lines merged and broke to the upside. On any other day, this would be a storing signal in the direction of trend, however price was in the 25m open range.
A: Lines merged B: Entry bar
CHART OF THE DAY
This by far showed price action from open to close on a strange day for me. Price break above open range to R1 and tapping the top 4-5 times before heading all the way down to bottom of the range and closing near the pivot.