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Overall it’s been a great week for the bears. We have seen a bearish spike lower, then a channel, then a trap (yesterday). But there it has been a strange week for price action. Tuesday we closed at the POC, Wednesday we closed way above the VAH and Thursday we closed way below the VAL, so it may sound like we have been all over the place, but progress [in any direction] has been slow.
Most notable points of interest from the chart (on the futures chart):
- Low Volume Node between 452 – 480
- VAL at 452
- POC at 495, just above the low volume node
- The median line (pictured at the bottom) retracement
Today, if the market does hold the weekly lows, we have an opportunity to buy low and target yesterday’s POC of 495 and yesterday’s high of 565. There is a small gap to close from this morning and we also have the Low Volume Node that could slingshot the price if it pierces it.
A stop loss would have to be under 375, so currently, with price at 410, it’s a pricey trade of 35 points, meaning we’d need to target 105 to get the right ratio. Therefore an order of 390 is interesting. The risk is that a move to 390 comes with force and the move break through support on the way to the monthly support.
If the market breaks the weekly lows with force, then it’s highly likely that we will go and test the monthly low. We are already pretty low this week so is there value to sell from current levels? Not really. However, yesterday was a great example of a bullish failure and a bull trap. So you’d need to look for those again. 450 is interesting as it’s the start of the low volume node. If price rejects a move through this level, it can create a trap there.
There are a couple of spots. For example, a stop loss could be just inside the low volume node. This would be a test of the evening high from late last night. A rejection here would open up a trade from 450 to 385 with a very small stop loss. The risk is that price zooms through the gap and you get slippage on your stop. Another option is a short from yesterday’s POC, which is the top of the LVN and previous support. A 25 point stop could offer 3:1 up there. So 490 and 566 are interesting spots to short.