May 232013

This morning I wrote “Volatility should remain fairly high this morning although I don’t expect it to be anything like yesterday.”  It wasn’t quite like yesterday, but it was actually a little more volatile than I had anticipated.  New 6t range bars were clicking off every minute or so on my footprint charts.  The ES made a 10 point run in 10 minutes into the DTG 42.50 level after all the housing start number.  I just wasn’t comfortable with the order flow:, “10 points in 10 minutes = high volatility making order flow suspect… fading is riskier than normal…  I prefer to trade with momentum with volatility like this…”  My read was that 1645 was going to be broken and yesterday’s low of 1646.50 would be tested and become the key rotational price of the day (as I had posted in chat pre-market).  An attempt was made on 1645, but the sellers slapped price down a good 6+ points.  There was actually an order flow short after the 1645 rejection.  The upward momentum was stymied as price consolidated for a good 30 minutes.  However, I had already declared that volatility was high and order flow was suspect, so no potential order flow opportunities were considered today.  I was asked what I meant by “trade with momentum”.  I marked the chart below to try to explain what I mean.

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