(Prices here are based on futures)
It was a quiet day for me yesterday as I was at home completing various house moving chores. There is more of that today and tomorrow. I was (and am) watching the markets but did not spot any opportunities (on the DAX or FTSE) that interested me yesterday. I did open a number of other positions on other markets including currencies and Gold, which are doing well, but nothing for the DAX. Today looks different.
We missed very little yesterday. The value area yesterday was between 419-440, very narrow with the POC at 427. This POC is currently naked as price is rallying higher. I notice that we closed way above vwap yesterday, way above the value area high and actually above the deviation high. This normally suggests the start of a bullish breakout. This morning we have a gap higher (yet to close) to add weight to that argument. As I type this, we are having a go at closing the gap.
I have drawn a very simple median line through the balance point here, which seems to the the gap. Price will often come back to touch this median line. This assumes that the median line is valid. If we break below this, perhaps the price is looking to touch the naked vpoc, or at least close the gap and test the value area high from yesterday.
If the recent 375 low is the end of the bearish activity, then we need to now go on and take out the peaks between the 570-670 zone. If we fail to do this, then it will only encourage more selling.
The other side of the argument is that the price has just rallied into some heavy selling and 540 was actually a trap for buyers. Therefore the 540 this morning was a new lower high and now we go to test, or take out the 375.
Bollinger Band Strategy
We were way below the BB when the divergence came here. A break back inside allows the price to retrace back to the median line.
I am testing this again today, so can all premium members please click this link and let me know if you have any problems accessing it.