NQ1! Gap DownEntry missed by 5 ticks or 1 point and 1 tick. Unfortunately, the idea behind this setup can't be shown to the detail that I would have liked, on a chart, as I am unable to publish an idea on timeframes of less than M15. However, I will try my best to describe and explain as clearly as possible in this idea.
My first thought of call after hearing the new Steel Tariff news was that Futures would possibly gap down into Sunday's open. This part of the thesis was correct and so continuing from here, I wanted to see how price action behaved post the gap down and whether or not price would fill the gap or rolled over and begin a further leg down. To the aid of 20/20 hindsight, we can now see that price rolled over to the downside. This next part is significant to whether I was going to leave a Limit Order resting. Before the roll-over was instigated, I would have presumed that traders who were immediately short from the open were then in immediate drawdown due to the temporary rise in prices before the continued down-move. Their buy-stops would have either been above the first one minute candle's high, at an area below the previous support now turned resistance or above Friday's close.
Again hindsight shows now that the majority of the short term liquidity was at a zone below the previous support area. After the initial roll-over move, I then immediately changed to an M1 timeframe to see if I could spot firstly a liquidity grab and a break of structure to the downside due to displacement thus creating a bearish price imbalance or more commonly known as a Fair Value Gap. The presumption that whoever placed market orders immediately at the open, boosted this theory that Buy-Side-Liquidity could be present above the market price.
On M1, I spotted the roll-over to the downside after taking out all the traders that were immediately short from the open. Then, in conjunction with one another a break of structure and displacement. Displacement, a strong period of selling pressure producing a price imbalance or Fair Value Gap in this instance needed to cause price action to close below or break the short-term swing low after the liquidity grab, which is known as either a market structure shift or break of structure.
There were two opportunities to trade short before leaving my Limit Order resting at the Fair Value Gap that you will be able to see on the chart as a small red rectangular box. All the necessary labelling is there. I was just not on my toes enough to spot the first two OTE points before seeing the market drop further. Therefore, I thought to myself, leave one sell contract resting at the 0.25 Gann level, being measured from the high of the lower wick of the FVG to the low of the higher wick of the FVG, (this is something that I am back-testing to see if the 0.25 Gann level always gets hit within these price imbalances or not) with a stop above the first bearish candle's high that caused the break of structure on M1.
I hope this description is good enough for anyone wanting to read this. If you have the ability to scale down to the M1 chart then please do take a look at the NQ1! from last night's open and I wish you all good trading.
