Trade Examples

Balance Breakout - Success


Leading upto the FOMC meeting Sept 13 - the market had come into a 4-day Balance. Following the FOMC announcement in J period the market broke above the 4-day balance and never looked back. While the breakout was triggered by news - this is a text book example of what a breakout will look like. Lets look at the profiles below - the classic characteristics include (1) single prints out of range (2) 1-time framing up for the remainder of day (3) closing on the highs



Balance Breakout Failure - 

After Balancing for 2 days on July 6 & 9, the S&P's gapped higher on July 10 and tried to breakout to the upside. Overnight Inventory was mostly Short. In addition, on July 9th we had a Prominent POC (they act like magnets) and a Poor Low that needed repair. We also had 5 handle Gap (a form of Excess) above the 2 day balance. In the first 30-45 mins after the Pit Session Open - it was clear that the breakout was a failure. Not only did the market fail to fill the Gap above but it quickly filled the Gap below and continued to auction lower. The destination trade became the opposite end of the 2-day Balance at 1341. The market not only reached its destination but made new lows resulting in an Outside Day. See graphic below.

TRADING GAPS - 

After trending down for 4 straight sessions, the market came into balance Jun 4/5. Overall the market was very short. On June 6, the market gapped Open and never looked back. It was clear right of the Open that the Gap below would not be filled. The S&Ps left a long buying tail (Excess) and 1-timeframed higher for the remainder of the Pit Session.