6 Nov – TL breaks for +80 but reverses again

Today was election day in the US. The day’s trade was about the D1 TL that was supporting the D1 Corrective retrace.

I wasn’t trading today except keeping my eye on this TL because Monday’s 7R loss needed to be dissected and actions taken to find out what happened and stop it happening again.

The TL did break in early trade and reached +80 on the downside before reversing.

The decline stopped dead at S2 and that gave a lovely buy set up with such a fast move into the level. Taking a closer look at the break, I would need to have taken the 169 into account if I traded this on the M1 chart. 

Until the TL breaks convincingly, we are still in a ranging market and therefore the 169 is in charge. Taking M1 TL breaks in a ranging market is high risk anyway – so it’s important to give myself the best possible chance of a win by using levels in conjunction with the TL.

Not only was the 169 more than 10pts above the entry but there was also an area of confluence: CBOL, FUT close and R1. This makes this a very inviting trade but only if the stop is adjusted for the levels above.

The reversal at S2 was powerful, but knowing how far these trades can go, it’s wise to keep plenty on the table. However, in the afternoon session, the market started to butt up against the M15 169, while supported by the cash chart weekly 200MA on the downside. It broke upwards, made headway above the 169, came back to re-test the cash chart level, rejected it and with that PA, the short trade was over.

This was the picture by the end of the day: the TL had broken but the PA was a mess due mainly to the mid-terms in the US