The 'Strong Rejection' - 60min/30min chart, timed off the 3min
OK folks. So today, I traded a set-up that I refer to as a 'Strong Rejection'. It is identified on either the 60m or 30m chart and is the first sustained rejection of a trend when new 10d highs are being made. It is normally followed by a sell-off which can either be a couple of points or something a little more ferocious. Once in, trade mgmt for me is about identifying the pace of the move and therefore suitable exit targets where I believe things will get sticky. When these work out, they generate a big reward.
What I have done is annotate 3 charts. Chart 1 is a 3min chart which is my main viewport into the world so we will start there:
(1) The NVPOC for the overnight session is just below the 10d/5d resistance level. My expectation is that the level is going to be challenged today and I expect a new high to be made. Right off the open, the NVPOC at 61.50 was tagged and price stopped 1 tick shy of Support at 60.50. It means business today so even though it has opened out of range, I will not take an immediate reversal off the high as I guess the mugs will short at this point and this liquidity will be hoovered up.
I am seeing no signs of sellers stepping in yet and I have now adjusted my interest to 65.50 which is 1 standard deviation away from the settlement price. My expectation now it that this will be the next candidate reversal point.
Price continued to move up further without abatement.
(2) OK, now seeing signs of sellers stepping in but it is making new highs so am a little suspicious of this.
Switch to chart (2)
(3) On the 30min, I see no evidence of sustained rejection yet, nor am I seeing time and price breaks on the 3min. Continue to stand aside. However I do not think it will make it as far as 2 SD from settlement - it just doesn't feel pacey enough to get there.
Back to chart (1)
(4) OK made a high now but it seems to be slowing down, start tuning in.
(5) It has not made a new high now and the second test was about 20mins from the first test. For some reason tests of highs and lows on ES early in the session tend to be separated by about 20mins (roughly) - this fits the bill for me. I can see a time and price break forming here.
Switch to chart (3)
(6) OK, I've got a strong rejection here on the 30m and I can see clear evidence of time and price break on the 3min. Volume is dropping, buyers are drying up.
Now I take the short and get filled at 66.75.
What happens next though catches me off guard a little. It is heavily base building around this level with about 70k/80k/90k contracts traded around 66.75 here in a very condensed and blocky way. Now most people take this as a continuation pattern but the shape of the base is too 'messy' which tells me this is probably not a continuation pattern at all. The profile is very top heavy and unbalanced and this positively reinforces my view that this is a turn on the hourly forming.
Switch back to chart (1)
(7) OK it finally tags the previous high at 65. This is taking an extraordinarily long time to turn and this base is pretty big for a mediocre kind of day. Slightly suspicious.
Eventually it does go but I have a dimished level of trust to run this trade off the 30min chart, trailing above the high of the previous 30min candle. As it is now forming the extension of the lower value area (rather than a clean break and new value area), I look to see on the chart where the boundary is which is broadly around 63.50. I adjust to this being my target and observe how it behaves here. If it gets sticky, bail, if it plough's through then great.
(8) Got sticky, out. Not helped that it has moved 3pts in 3hrs and I am absolutely fncking starving.
So that is the 'Strong Rejection' when it doesn't quite work out. Now trades like today really try my patience. I much prefer the instant gratification/ferocious move type trade but tbh, most trades are bread and butter ones like this. On days like today there is a lot of listening to my gut for example:
- Questioning whether my call of it being a reversal rather than a continuation and understanding that the crowd will be ignoring the pace of the session and trading the pattern, not realising they are just consuming sell limit order liquidity, carefully laid there to game them.
- Deciding to look for an exit around the previous value area boundary rather than trying to run it for a bigger win, understanding there is no dynanism in the market outside of the initial balance it set in the first 60mins of the session.
For completeness:
Entry: 1566.75
Stop: 1568.25
Exit: 1564.00
Trade duration: Nearly 3 fncking hours!!!
Anyway, any questions fire away - I'll try my best to answer. Also let me know if this kind of detail is useful. It's quite involved writing to this level so I will only do it if there is demand.