11/07/2019 ES Daily Recap
Going into today, it looked like we gapped up overnight on some positive china news. We would have needed to hold and show some sustained momentum in order to have any break over ATH. For the short side, I was looking to take it at the 3100 resistance which although was not a historical resistance, but a psychological one.
Watching real time at open we saw some strength in the market and we moved up the mid 3090s which we did stall a bit. We ended up pulling back at this area and shaking out the weak longs and then continued higher after grinding a bit. Anyone who overstayed on the sell side was squeezed out and took out their stops. The idea was that the more we hold up at this level the more nervous the sellers would be since they are not getting paid on their trade. The 3100 short was a very obvious trade that everyone was looking at so, it ended up being front run and it ended up pulling ahead of my entry. We did develop a tight range for the majority of the day and the only other valid play I saw was when we had a quick squeeze of shorts with a fade off of the highs. It was a riskier hit n run play and I went light for this reason (it is a play you should not overstay). There was a large offer of 1000s at 3098 so my stop was placed behind it and I entered around 3096 and took several pieces off on the way down until the final piece at the start of the move. What I saw that validated this trade was that we did build quite a bit of value and as long as we did not gain acceptance and TICK wasn't sustaining momentum we had good odds of dropping back down. An analogy for this is like a rocket with little fuel (low volume) flying upwards and as soon the fuel is exhausted (no more buying) the rocket will fall back because of gravity (price follows where there are buyers, POC is fair price).
Towards the end of the session we did end up filling the gap.