Nov 292017
 

Today we had a great example of when typical DTG ‘trifecta’ swingers see everything they like to see for a specific bet but never see the traction they would like to. Before the clock runs down and they may be forced to exit giving up profits prior to the end of the day, that is. Hopefully by now the structure framed by the YC and YH 25’s-27’s was clear to all of you? I pointed that out in the room after the breakdown as a spot continuation shorts would likely be stalking so as always see the transcript for more color.

So here we see the first push in purple trapping ton of new buyers just as short stalkers like to see and this was followed by two high failures in pink and red with buyers exhausted rejecting highs and the majority leading out short into the latter. If you were a bear at the time and stalking this was undoubtedly your spot. The first thing to be aware of though was the next structure below likely to draw action was close being the Globex low 23’s. Remember, there is never anything we can do about that guys. The idea is to adapt naturally as the market does and that is how things lay out quite often in contracted vol. And with that for those who entered from the pink or light red zones you reached your first or all out scale in light blue as the sellers hard rejected lows below the case 23.25 and the stats showed the majority of size leading out long into that attempt down. For those who missed or otherwise waited on the early test of the 25’s-27’s zone there was another one in dark red showing strong buyer absorption. Although some of which I’m sure were prior shorts holding out for bigger moves and covering out. The lesson: greed rarely pays. Trade what IS not what you want it to be says I. Anyway, for those who did sell from the dark red you basically found the same scale point around the OL this time with an even more stark hard rejection of the case low in dark blue and again with an even stronger delta divergence.

Obviously many who were sellers were running multiple scale out models and looking for more movement down into the R to S 20’s also discussed in the room. But alas, we never got there and the clock just slowly ran down. How EXACTLY do you handle these situations? After a certain elapsed time or rotations against you do you flatten the remainder? If you didn’t take this trade in looking back at the flow history can you see where you would have thrown in the towel and why? These questions are assuming of course you are running a model that must be flat at the end of the RTH session. Not that there is any requirement for that, of course. Very important questions to ask yourself and answer with confidence going forward…

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