30 Oct – Up down, up down, false breaks abound

Pre-open scenrios

The pre-futures open you can see that there are obvious scenarios for today were:

• the market can continue to compress – probably making false breaks of the H4 TLs in the process
• it can break out of the upper H4 TL and make a new corrective up trend
• it can break the TL supporting the bounce and continue lower

So I need to have a strategy ready for each of these possibilities and I need to know what PA will tell me which pattern is likely to be emerging.

This was today’s PA on the H1 chart, indicated by the yellow box.

We saw the ranging option with plenty of false breaks on upper and lower TLs.

Strategy for today’s PA

The correct strategy for this PA is to buy and sell extremes. But how can I know which strategy to use before the PA has formed? There are a few clues:

1. The failure to break the upper TL in the futures session.
2. Having rejected the upper TL it heads for the lower one, again with impulsive PA – which indicates a reversal is more likely. It pops through the TL but meets the Futures close below and reverses there.
3. Monthly S3, Pivot and pivot and close form a confluence at 11335 and it reverses again.
4. Makes a higher high and sees a 3Min bar acceptance above the level when it revisits, this looks bullish but the candle outside the Bolli Bands is a reversal signal and duly does so.
5. Another area of confluence is at 11211 to 11221 with S1, Low (yesterday) and CBOL so this sees another reversal and gives a Bolli Band reversal signal.

The rejection of the first try of the upper TL and then the rejection of the lower one tells us we are likley to see ranging action. But I didn’t know that when I traded the break of the H1 UPPER x2TPs line, so I ended up BE on this trade. So what do you do?

When trading TL breaks, even though they often travel hundreds of points, I take 25% off at 1:1 to reduce my risk to 50% of the original risk. I also use the principle that fast moves into TLs are unlikely to break: if price is outside the 3min Bolli Band when it hit hits the TL, it is less likely to break, plus this givs me a Bolli Band trade at a KL

What I did

08:03 Bought 19 @ 11351 H1 TL break at the futures open  | P&L = -0.1R

08:57 Sold 46 @ 11401 3Min Bolli on rejection of the TL : +1.8R

09:18: Bought the 3Min Bolli on rejection of the confluence at Close, Pivot, Monthly S3: +1R

Today’s most gorgeous setup

Today’s cracker would have been to buy the futures open as it traded off the gap close. You had to wait for the TL for this but this was just a few pips above. This trade produced 90pts with no heat (I took it on the H1 but not on the M1)