1 Nov – rapid 1st of month ascent

Pre-open Scenarios

The market was forming a rising wedge and as long as the lower TL containing the wedge held, we will see more gains. It is also 1st of the month which is often bullish as funds buy the market.

As well as the rising wedge, we had the weekly cash 200 MA at 11484, which is a hugely important level (see yesterday’s report) and if we regained this, the market will be bullish in the short term at least.

This level was fought over today and the market regained but then sold off. The H1 chart of the day’s action shows that inspite of the reversal, we stayed well within the bullish wedge.

I was at first mystified by why the market had turned where is did – at 11569 – but then I realised I had missed a key TL (the thickest pink line in the chart below), which I drew in later and it predicts the reversal point perfectly (the golden circle). 

Strategy for today’s PA

Overnight action had been unspectacular and the market opened with a gap down.

1. There was a short setup for gap fill during the futures session. This trade needs to be treated as a scalp because it’s first of month and we could see a bug buy in from the cash open
2. The futures close was 11425 and I had a support line at 11411 , and the market closed the futures gap in the first 5 mins of trade and then rocketed.
3. On hitting the weekly cash 200 MA it stalled a while and triangle formed, giving a nice long entry. This was a tricky trade though because of CBOL, yesterday’s High and the BNR just above.
   
4. There was confluence just above 500 with an unfilled gap from 22 Oct at 11524, a TL and CBOL at 11507.
5. Price reacts to this level but only makes a very small retrace down to test yesterday’s high and then it’s off again. This shallow retrace gave a nice opportunity to enter or re-enter a long and this time there was white space above.
   
6. We then see a final slower climb to the TL mentioned above from where it moves lower throughout the US session
   

Shallow declines and breaking through KLs are all signs the market has plenty more welly in it. This is valid until there is structural break such as a channel break that doesn’t reverse and a new swing low without regaining the most recent high.

What I did

08:05 SELL x 86 @ 11407 for gap fill fade | P&L = -0.9R
08:10 BUY x 78 @ 11416 for 3Min Bolli at FUT close & support | P&L = +2.9R
09:02 SELL x 95 @ 11432 for 169 reversal | P&L = -0.5R
09:06 SELL x 79 @ 11447 for KL fade | P&L = -0.5R
09:11 BUY x 23 @ 11470 for H1 TL Break | P&L = +1R
09:22 SELL x 80 @ 11481 for 3Min Bolli ?? | P&L = -1R
09:31 SELL x 79 @ 11492 for 3Min Bolli ??? | P&L = +0.4R
09:46 BUY x 95 @ 11489 for 1Min TL Break ?? | P&L = +1R

TOTAL +2.4R

Today’s most gorgeous setup

Buy futures gap close at the cash open – especially given the rising wedge formation and it was the first of the month. This was a monster trade (+160pts), but depending on your parameters you probably needed two attempts at the trade as the low was 11403.

You caould have entered this trade in the futures session rather than waiting for the cash open, when action is often too fast to get the price you want. On the 3min chart, the Futures session PA forms a mini inverted head and shoulders pattern, giving you even more reason to buy. And the Bolli Band is breached while horizontal so that is also giving a strong buy signal.

Aside from that, the strategy of using compressions around KLs to build a long position worked a treat today.