Trading is often like a game of poker, patiently waiting in an aggressive game for the right hand to play. This does not mean you only play strong hands, but play hands like 5-6 too often you will eventually get burned. Position and timing has to be right in poker and trading is no different. On the 13th of March we posted this chart and mentioned "If we break the 8221 level this increases the odds that we move lower and as we said Saturday could likely test the extreme 7666-7238 area". After consolidating around the 8220 for nearly 6 days we failed to hold and we tested the 7238 area as we mentioned was likely.
Someone could say "you are just taking both sides with the IF then statement". True but this is no different then playing poker. You do not go into a hand thinking "I'm going all in here", you get your pocket cards, read how the other players react and bet theirs, look at where you are positioned and then you make a decision to fold, call or raise. Do you think it is a coincidence that we consolidated for 6 days at the 8221 level? Just like the straddle guy who always raises with anything, after time we get a better feel for how the market will play a hand. We understood that this was a critical level to hold and the market was likely to consolidate there and made a trade. However we were in and out as we understood IF the market gave way to this level we likely test the 7238-7666 level. Could we have traded 7238? Sure but hindsight trades are 20/20 and in my opinion we were not in position to play 5-6 there. The market simply was so bearish we could easily have gone lower. This is one of those pocket J's hands that we simply threw away, and as all good poker players do, we forgot about it even if we did hit a Jack on the flop vs Aces.
Our chart here is the same as the one on the 13th of March. Nothing much has changed on the daily, other than we are at a level where we expect a pullback and potentially a trade setup. This prevailing bullish swing is strong with 5 out of the last 6 days closing higher than the open, but markets do not go straight up. So here at a critical level we want to look for a pullback and continuation before trading. 8680 is the first minor retrace level that we are looking at. I feel more comfortable trading from the 8404, level which we mentioned before, and as this is likely to be the support zone. 10050 is our initial target level, and we likely test this level regardless if this is a bullish or bearish market.
9900 could be an area where we have a fake break out from the previous bullish swing testing our 10050 target level and pulling back. How the market reacts here will determine whether we are in a bullish market in the midterm, or still in a bearish market. Similar to the double top at 11700 where the failure to break implied this was a weak market and a selloff was eminent. We reduced prior to retesting this based on the structure of the move. Structure and action is everything, no different then reading a poker player. Right now we want to play strong hands and not try and force a trade.
In closing, we are looking for a specific setup here not just looking to go long even with a 10050 target. Whether this is forming an ABC corrective pattern or this is wave 1 in a broader move, we want to position ourselves to reduce risk exposure. Obviously 9070 is a critical level, just like 8218 was. How the players react here will determine if where and how we enter.
Someone could say "you are just taking both sides with the IF then statement". True but this is no different then playing poker. You do not go into a hand thinking "I'm going all in here", you get your pocket cards, read how the other players react and bet theirs, look at where you are positioned and then you make a decision to fold, call or raise. Do you think it is a coincidence that we consolidated for 6 days at the 8221 level? Just like the straddle guy who always raises with anything, after time we get a better feel for how the market will play a hand. We understood that this was a critical level to hold and the market was likely to consolidate there and made a trade. However we were in and out as we understood IF the market gave way to this level we likely test the 7238-7666 level. Could we have traded 7238? Sure but hindsight trades are 20/20 and in my opinion we were not in position to play 5-6 there. The market simply was so bearish we could easily have gone lower. This is one of those pocket J's hands that we simply threw away, and as all good poker players do, we forgot about it even if we did hit a Jack on the flop vs Aces.
Our chart here is the same as the one on the 13th of March. Nothing much has changed on the daily, other than we are at a level where we expect a pullback and potentially a trade setup. This prevailing bullish swing is strong with 5 out of the last 6 days closing higher than the open, but markets do not go straight up. So here at a critical level we want to look for a pullback and continuation before trading. 8680 is the first minor retrace level that we are looking at. I feel more comfortable trading from the 8404, level which we mentioned before, and as this is likely to be the support zone. 10050 is our initial target level, and we likely test this level regardless if this is a bullish or bearish market.
9900 could be an area where we have a fake break out from the previous bullish swing testing our 10050 target level and pulling back. How the market reacts here will determine whether we are in a bullish market in the midterm, or still in a bearish market. Similar to the double top at 11700 where the failure to break implied this was a weak market and a selloff was eminent. We reduced prior to retesting this based on the structure of the move. Structure and action is everything, no different then reading a poker player. Right now we want to play strong hands and not try and force a trade.
In closing, we are looking for a specific setup here not just looking to go long even with a 10050 target. Whether this is forming an ABC corrective pattern or this is wave 1 in a broader move, we want to position ourselves to reduce risk exposure. Obviously 9070 is a critical level, just like 8218 was. How the players react here will determine if where and how we enter.
