The below update was an email alert that went to subscribers of the Market Dimensions Advisory. This MDA SnapShot alert was highlighting my thoughts on the E-Mini S&P market for 1/7/16 and a potential trading idea based on current market pricing. If you are not receiving these emailed alerts I encourage you to subscribe. If you are receiving the alerts but not in a timely manner I encourage you to contact me to discuss my premium membership services.
Published 1/7/16 9:16 am central:
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We saw a very sharp sell off in the overnight. This can make it very difficult to try and enter into new positions the following opening session. It typically means we can have strong fast retracements so it is a bit frightening to try and join the move when it has moved so much or if everybody is “buying the dip” at the same time a small leg lower can leave everybody running to the exits and having us move even more against us.
When we get large moves like this, I like to look at different time frames and try and find some common levels or themes of where people are seeing support and resistance and then try and lean on this for entries. In the case of the ES, we see that we did have some Buy zone setups this morning around 7am that worked. As a self-directed trader who is comfortable with the MDA system, you could definitely taken advantage of that, but many people most likely missed that because of too early. My thoughts are where will these longs go and where will they lose steam. Will that be a chance to sell? If you look at the Market Action Scanner this market is definitely in control of the bears with us below the bottom lines. We also broke below the 200 daily moving average a few sessions ago which is a bearish indicator. I was talking to a fellow broker here yesterday about 1940 being a support zone based on a daily chart, but didn’t think we would hit as quickly as we did.
Back to the 30 Min ES chart. When we make strong moves like this I like to use a retracement tool on the charts to see where the 25%, 50%, and 75% retracement zones are.
I do not always use these as reasons for entries but it is another tool I use to add for my confirmations. Given the strong move downward, and the overall bearishness we are seeing in the ES, I would say the 50%-75% zone would be a good spot to try selling this and looking for us to challenge the recent lows.
Here is a look of the MDA 30 Min chart with the retracement zones:
Market Action Scanner: Trade Level Confirmations
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