TODAY:
A
The holiday is behind us. The Euro Zone open rocketed the ES from the 1329.5 area to a 1337 high. The ensuing pullback (PB) produced a rectangle with a 34.5-37 range.
B
Aggressive traders will short the top of the rectangle, and long the bottom, Albeit, they are mindful of a potential breakout (BO) that can create a loosing trade. There does not seem to be standard protective stop, with variations from 4t to 8t. Personally, if the entry is correct-or near correct- you should not need a stop in excess of 8t, and there are strong arguments for a 5t stop.
Traders looking for a BO long, will tend to wait for the initial PB after the BO. You will not know which test of the upper level will BO, however, after the initial 1337 failed, we had two challenges and test three seems to be a legitimate opportunity for the BO to succeed. Shorts will allow a 5t failure, then look for a reason to enter long. Longs have a rising EMA and a weakened resistance at 1337. B4 strength was supportive for the long. THEN...
C
An upward bias channel. Good for longs, at the bottom of the channel. A long at 37 worked, briefly. Late bulls most likely were trapped by the PB of b7 and b8. From part B, and worth repeating. Unless you are prepared for a failed BO-should it occur- then "Traders looking for a BO long, will tend to wait for the initial PB after the BO". They entered at b9 and b10 and never considered another short for the A.M. The channel BO offered another chance to enter the long trend run. 41.5 was identified as a key point, and this played out as the day progressed.
D & E
Selling strength was noted in the chat dialogue, and we participated in the EMA PB. The peaking of D was the right side of a M pattern. The pattern is fairly straight forward. PA rises, rolls over, and tends to have a shallow PB. The second half of the M can be of an equal o lesser height, but the backside PB tends to be much stronger. We tested the 41.5 support, then had a BO on the backside PB of the "M".
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