Recap: I wrote in the plan that: “For the resistance trade at the 5203 spot: there is a confluent level at 5208 where the middle band of the pink structure on the 8H chart. This trade could look like a touch to 5208 and rejection with a candle close below 5203.” This played out very well but I had a late, post-vacation start and missed this enormous move lower. I then made the critical error of not following my plan for the long trade at 5182, about which I wrote “If price can get above both 5182 and close a candle above 5185ish, then I’d look to get into longs.” I entered this far too early, though on a half-sized position, and this was stopped out. Post vacation type of stuff.
Later on, I got into a trade though: “Since we know buyers are positioned there, a move below 5116 could trigger a stop run which creates a lot of selling pressure.” We didn’t get the exact entry I described in the plan and so I instead entered short below 5116 after the retest and rejection around 2:30est. I de risked per usual and since the gap fill was so far away, I just trailed the runner with a tight stop which was taken out at 5100.
Balance/Trend: The market has now lost the steeper rising trend channels in white and pink and price is trading comfortably below resistance from the long-term channel in yellow, which shows the trend higher out of the 2022 bear market. I have also now reintroduced an old trend channel (green) that hasn’t been in play since February. As for the channel lower, it’s still developing and the violation of the lower bound of it means that the selling is accelerating and that it remains unformed.
Analysis: One of the main things that I talk about in my weekly videos is market structure. Areas where trade is highly imbalanced leave specific patterns on the market profiles, and we often see these areas get filled in at a later date. In this case, a huge gap opened up in February after NVDA earnings but further momentum was hard to come by. We’re finally seeing a pullback that gives market participants the chance to revisit and repair this structure, and this also gives the RSI the chance to reset after months of being in overbought territory on longer term charts. We’ve now lost the 50 day moving average in the process and are trading below it for the first time since November. Momentum is picking up for bears ahead of the May seasonal downturn and they’ll now want to move price back into the green channel to continue to flatten the trends pointing higher.
Detailed Trading Plan & Charts