ES_F, Dissecting the market action
Updated
My personal way of trading is based on a naked chart, I don't use any indicators, instead I try to dissect the price action from a market auction perspective. I like to read a story and find the footprints of the participants. The market goes through well predefined phases: initiative moves, finding a new area top, finding that area bottom and establishing a new value. Those 4 steps are seen in all markets and all timeframes. On the chart I highlighted such areas from recent price actions of the S&P futures.
As seen on the chart the price just broke out of the established balance area. The main question to answer is whether that breakout is going to stick or we will see a false breakout and return back into the established area. If the breakout is going to stick the price will move above 2540 to retest the previous value 2560, if accepted, the price will move to 2575 the edge of the area. Knowing that market action allows to establish high probability positions.
As seen on the chart the price just broke out of the established balance area. The main question to answer is whether that breakout is going to stick or we will see a false breakout and return back into the established area. If the breakout is going to stick the price will move above 2540 to retest the previous value 2560, if accepted, the price will move to 2575 the edge of the area. Knowing that market action allows to establish high probability positions.
Note
Today’s action was in line with the original idea. The buyers were active all day long in the market was in the trending up mode. The first target 2560 was tagged. 2540-45 is aggressive support following by 2530 and 2520-25.Note
I think that a pullback is coming. The reward to upside is diminishing. I personally shorted this afternoon and covered at support.I think that the market is short term overbought. I think lots of buyers are waiting for a decent pullback who missed this upside move.Note
A shallow pullback this morning offered a short opportunity, however, the buyers remain in control so far. The market is processing a range 2545-2580. The momentum is slowing down though, a reverse from support took almost a whole RTH session. The level 2560 could be used as a sand line. If the price continues to balance above it there is a chance for a breakout and a move to 2595-2600, the downside scenario is to revisit 2520.
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