3 Jan – Second failed break out long of TL

Published by SallyU on 3 January 2019

Pre-open Scenarios

Yesterday saw a strong reversal from the cloisng gap left on 27 Dec and then continued gains, breaking the upper TL on the daily chart. ON the market has given back most of the gains as is trading around 10500 just prior to the futures open.

So the levels I’ll be looking at today will be 10387 which was yesterday’s low. A move below there will open up a run down to test 10253 and if that breaks, the next target will be 10,000. the Dax hasn’t been below 10,000 since July 2016.

The futures opened with a 92pt gap down and by the cash open the gap had widened to 104. So the question was, would the H1 down trend continue or would the market look to fill at least part of the 100pt gap?

The H4 chart to the left show the broken TL that was supporting the underside of a triangle – this most likely needed to hold for us to see further gains. On the H1 chart on the right, the orange TLs outline the falling wedge that formed from yesterday evening’s quickly rejected high.

What the market looked like at the end of the day

Early gains reversed and the market broke out of the Neutral Zone temporarily.

This is the 3Min chat which shows that every time we reached the upper TLs, the market immediately reversed. The move into them was fast, implying that the market was looking for orders , so when it found a pocket of sellers and no buyers it at the TL you see a sharp reversal. The weekly pivot was very active again today.

Key points about today’s PA and setups that worked

The 169 was running through the middle of the PA which indicates ranging PA.
The 3Min Bolli system works well in these conditions and three successful trades are easy to identify here.
There was a classic pre-breakout PA at the lower edge of the Neutral Zone: it bounced off the level on the first hit, made a LH and then broke through.
The breakout hit the BNR and reversed with 3Min Bolli setup.
A similar pattern was seen when it broke back in: breaks up into the zone, reverses, sees an impulsive candle into the immediately bought up, makes a new high above the level and then continues up.

On the M5 Chart of today’s action, the Bolli Band setups are just as clear and 169 was also effective.

How effective was my Neutral Zone? Both longs and shorts worked inside the zone. The lower side of the zone was clearly the active level and it broke for 50pts.
How precise were my levels? None of my RES levels were in play but I traded off the TLs instead. SUP 1 saw a lot of orders and held for 30mins. I missed the BNR – that should have been SUP 2.