MAPPING THE MARKET PART 2

When mapping the market, we determine  points when buyers/sellers are likely to take an action we can use to our benefit.  Essentially, the market PA has four parts:

1. Break out long         Point where bullish run will likely begin/succeed.
2. indecision                Trades are available, but may be scalps.  Market drifts in a narrow range.
3. Break out short        Point where bearish run will likely begin/succeed.
4. Strength of 1-3         The first hit can fail; a second push (leg) at the point is stronger.

Knowing the area, and how strong the PA is at that point, increases the confidence in the trade.


PRE-OPEN:

[08:59] <Chartmaster> today:  longer term bias(has been)down.  not to say we will not Take a long, but more favorable long term hold of long is at 1306 area  strong short below the 99 area  crushing blow to bulls if we see 95 fail

Our range bar chart was telling the story.  We were in a decline, but holding in the upper channel.  Our break out point for the short hit, but failed to continue, but more on that in the blog.

MARKET OPEN:

Price is rising, breaks the EMA, and hits our target.  If this was a movie, the next scene is one of struggle and fading out.  B1 closed below, suggesting this is likely a FBO.  It is also what we consider a scratch trade.

Being in a failing trade has a psychological impact on traders.  The stop loss was a -9t.  A +8 saving grace, but there was the opportunity cost of not playing the FBO.  The controlling candle b4 hit the lower target, and was a +1 auto-entry.  But notice how the bear did not carry through on b5.  This is a reversal setup, and it did test 50% of  b4, another clue  that is important in a reversal.

In the past, the 'advantage" of the trade was included, and then it was dropped.  The thought was, the trade was more important than the "advantage."  This post bring back the "advantage of the trade."  The reversal was a trade, and we had a strong 3.5 for the next long.  This time it was on the second push of the bull.  The next 3.5 was at the low of a channel.  Rough line, but the bodies never broke the lower TL.  It is a HL reversal.  Being at out map price was nice too!

We also played the hold point discussed in the morning commentary, when price hit the HP, and  formed a HL