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| 5 minute candle /tf on left, 1 min candle on right |
Another day of pain.
Gap down opens are difficult because - obviously - things are already down by the time the market opens.
So what to do? You have two choices:
1) go long for a bounce
2) wait for a bounce to clear resistance so you can trade WITH THE TREND.
The chart above shows choice #2 -- it required a lot of patience.
Eventually the market came off the bottom and "rallied", however, a quick check of Market Signals showed tremendous weakness (XLF, XHB, KOL, EWG, JJC, EWP, UNG, OIH all red).
The next step was to check a Higher Timeframe to figure out where Resistance would prove futile.
A 5-min chart showed a clear descending TL (chart on left)
A few minutes into the touch -- one could draw a slightly turned down TL and then it was a safe short with 8 tick stop. The rest was nothing but downside.
So key elements:
1) Determine the Major Market Direction (trend down day! this was obvious)
2) Determine a clear resistance level to enter (this required a lot of waiting)
3) Set it and forget it.
As it turned out - -/tf fully retraced to the lows for 80 ticks... with essentially no heat.
I missed this trade unfortunately... but hopefully next time we all catch it.
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