Market Context :
- Day - 2-day down time framing
- Week - 3-Week balance ( 59.05 - 55.75 )
- Month - 3-Month up time framing
- We are trading below last 2 Month POC ( 57.35 ) and last 4-Week POC ( 57.72 )
- Day Buying Tail from 12/06
Inventory
- Short term traders : Short
- Overnight : Short
Open Characteristics :
- Gap down
- Conviction : low
What a difficult day to trade filled with lots of traps. If you can survive this kind of day you made it as a trader. At the open the temptation to go short was high. I took a short myself as the open showed high down conviction. Here are the clues that was warning us about what happened next.
- We were trading near the 3-Week balance low.
- Down Tempo was extremely low after open.
- We left a poor low warning of possibly "too short" condition.
- Rejection of the low as we traded back above the day open and the merged POC from 12/6 and 12/7 merged profiles ( 56.28 ).
What happened next was a weak hands short covering rally that brought in value traders and gave a positive tone to the market. POC migrated up with the market and showed intraday prominency only in "E" period. The first time up time framing was broken happened in "E" period but as we have been taught by Jim Dalton we need at least two consecutive bars breakout to end a trend. "E" period low was a good level to enter with this trend. Shorts from yesterday were now feeling the pressure at yesterday's POC ( 56.78 ) and the trend never reversed pushing these shorts out of their position with the new high in "J" and "K" periods.
Today was a classical market reversal at a balance low area ( weekly ) created by a "too short" situation from short term and overnight traders . Again the key to success today was to realize this condition early on with slow down tempo right after the open, rejection of the poor low and trading back through the open of the day and of the 2-Day merged POC level from 12/6 and 12/7. One thing to keep in mind for tomorrow, value ended the day barely overlapping to lower, today low volume, weak buys throughout the day and we are still in a 3-Day one time framing down condition.
Good Trading !