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|2333.50||ONH / Limit up level|
|2290.75||RTH High / Gap fill level|
Lock limit up at the ONH which is not surprising to me at all. I alluded to this multiple times yesterday in WPT texts and also on my appearance on the SquawkBox with Scott yesterday afternoon. It just didn’t feel right to be short anymore. Now, does that mean that it won’t feel right to be short again? Absolutely not. I’m a short term trader who exploits short term thinking and moves. The tone could easily change before the closing bell today and the bias will be back to down.
This morning we are trading on a true gap and thus gap rules are in play. This is somewhat in contrast to what we’ve been seeing recently which has been extremely large gaps that still cannot exit the prior day’s range. Overnight inventory is close enough to 100% net long to call it that and treat it accordingly.
Our focus this morning should be obvious. Will newer buyers come in at the bell to follow on with the overnight players and take the market higher than the ONH? I think anything less than that is a disappointment for the bulls and leads to more status quo. You’ll note that the Key Levels above bring in VAH and POC which we haven’t seen in awhile. This is by design as once you have a true gap, you need to monitor for how deeply into the prior day’s range you do to gauge the strength of the counter trend move. If the gap fills, look to VAH next, then to POC. These are the signposts that you often hear me speak about.
As the day moves on, pay close attention to where value develops. We have not had value higher in some time. Breakaway to the upside with no overlap is the most bullish outcome while overlapping to up or unchanged is far less bullish.
- Early trade fails to take out the ONH and moves lower. This can happen very early, which means you short the low of the first 1 minute bar, or later as futures rally a bit then stumble back towards the open, in which case you short the cross back through the open. Your stop would be above LOD in either case and you would be targeting the RTH high for the gap fill. Always be cognizant that larger gaps often fill only partially.
- There is little evidence of corrective activity and an early drive gets to the ONH and has momentum, tempo, and internals to support a move higher. The ONH could be used as a breakout level for a long trade. Target is not specific but take the current level of volatility into account and monitor for continuation.
- A gap fill at the RTH High would be a buy today given the correct context. This is a fantastic R/R trade that allows traders to have a tight stop and large target. Keep it in mind if the gap fils
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