The Market Profile value areas and ShadowTrader Pivots for /ESH22 and /NQH22 Futures are posted free every morning in the ShadowTrader Swing Trader newsletter.
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Click HERE for a market profile key that will help you interpret the chart above.
| Opening In/Out Balance | out of balance |
|---|---|
| Overnight Inventory | balanced |
| Current Price/Overnight Range | upper third |
| Shock and Awe | yes |
| Potential for Early Trade | yes |
| Short Term Bias | potential reversal of trend |
| 4370.00 | Secondary down trend line resistance |
|---|---|
| 4317.50 | ONH |
| 4290.00 | RTH High / Top of Spike |
| 4252.50 | Base of Spike |
Ongoing Narrative / Commentary
Sellers seem to be on the run now as the large gap down yesterday brought in about zero new sellers and the short covering went from opening bell to close. That close was at the top of the range and culminated in a spike which is putting spike rules in play today. Gap rules are also in play as we have a true gap higher currently.
In addition to the spike, there was other poor structure within the profile (single prints) but this is normal on day one of a reversal when emotions run high and traders are forced to cover.
In yesterday’s weekly private webinar that Scott and I hold for options advisory members, I discussed that traders should pay attention to where the overnight activity comes down to in relation to the spike and thin structure. If you look closely at the market profile graphic above, you’ll note that we did retrace quite a bit, however, not fully into the single prints, nor into the value area. Consider that short term bullish. A rally can only get under way when the first higher low has been put in. Watch the ONL closely today to see if that is indeed a higher low that is secure.
In the Key Levels above, I’ve listed a technical level that I believe is important. Since we are discussing the potential for reversal such trendlines are important. I’ll end with a snapshot to illustrate the level.
- 01.05 4780.00
- 01.14 4632.00
Scenarios
- On the true gap higher, focus first on whether or not there is a gap fill and if so, how much. Given that sellers seem to be a big on their heels, I’m seeing the RTH High as a potential buy point. Failure to fill the gap fully would be a very bullish signal and traders should target the ONH and beyond, monitoring for continuation. Finding acceptance within range today changes the tone slightly but it will be all about how deep we go. As mentioned above, we want to see if the ONL is secure or not.
- Keep spike rules in mind as well today. Ideally for buyers to remain in strong control, all activity should be either within or above the spike and not below. Acceptance below the spike low would start to put the reversal into question.
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