Today’s intraday price swings were smooth, pronounced, and stable. It was an ideal day to be an intraday ’swing’ trader.
By ’swing’ trader, I mean simply trying to capture the market’s most probable sustained price action in one direction until that direction is reversed by the opposing force. The trend was down overall, but there were amazing swings that the nimble traders were able to capture both up and down.
I know I’ve said this 100 times but the first play of the day when the market gaps is to trade against the gap to “Fade the Gap” back down to the opening price. That trade working out instantly today, giving you almost 70 points of potential profit right off the bat.
The market continued its swing lower before forming a new momentum low and then ralling up to find resistance near yesterday’s close (a common phenomenon). Rather than continuing downward, bulls found prices attractive and then forced prices to eject upwards at key support (from the confluence of the 50 and 20 period moving averages) which completed the “measured move” portion of a bull flag that most people â€“ myself included â€“ didn’t see coming (because my bias was strongly to the downside today).
Nevertheless, the bull flag terminated exactly at the price that it was projected to do so (measured move), which happened to correspond with the falling 200 period moving average. A dual test of this zone (and failure to rise above it) set up a more powerful short-sell trade which trended down and tested the morning session’s lows (and helped validate some of the earlier pessimism in the market).
Price turned, forming a momentum divergence and swung back upwards to test yesterday’s closing price, and failed at this point to tread any higher. The failure swing hinted that lower prices were yet to come.
Unfortunately for the bulls, the market closed once again on its lows for the day (despite the after-market up candles after the 4:00 bell rang), which certainly depressed some of the buyers and validated the sellers.
Nevertheless, there were still clean swings and clean patterns within the structure of price that set up profitable, low risk trade ideas.