Patience has its rewards…
November 26, 2012 3:58 PM

This morning ES gapped lower 5 points. General wisdom is to trade from SHORT side on big Gap up or big Gap down Days. Todays’ Gap is about 40%ATR of daily range and is not a big gap down day. Hence today it may be choppy day with slight bearish bias. After market open, market drifted lower but showed first sign of reversal from 100% GAP levels. There was a large ABC formation from 11/22 and 11/23 with AB range from 1387 to 1407.

In this ABC, AB leg took 134 bars to complete (Friday’s rally) the AB range (1387 to 1407.5). Around 10am, AB retraced to about 50% range giving first clues of potential continuation of rally from Friday. ES retraced 50% of previous swing in BC Leg (60-70 bars). Comparing to AB Leg (134 bars) it is about 50%. But this itself is not quite enough for it to reverse and start building CD leg. Fib. Ratios between the AB leg showed 61.8% ratio around 4-6 points below the 10am price. I decided to wait for 61.8% so I can get into the trade. About 11.15-11.30am, ES further retraced and hit my 61% range. ABC is also balanced as BC leg took 150 bars to complete this range. This would be a great candidate for ABC if it were to trade above the EL level (1397). I patiently waited for a LONG at 1397. Relatively simple pattern to trade. My risk is 2.5 points (Below C). I placed my targets at 1399, 1402 (38%) to 1407 (62%).

Patience paid off… About 12.22p, my first target 1399 (+2 pts) was triggered. After side-ways and choppy trading, at 2.50pm, my 1402 target was hit giving me +5 points.


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