Trade Plan Monday
Supports are: 6852-6848 (major), 6840, 6832, 6819-22 (major), 6809, 6802 (major), 6792, 6787, 6780(major), 6770, 6760(major), 6750, 6744 (major), 6734, 6727, 6716 (major), 6708, 6702 (major), 6695, 6692, 6683 (major), 6678, 6672, 6663 (major), 6654, 6647 (major), 6638, 6631, 6624 (major), 6617, 6606, 6603 (major), 6597, 6592 (major), 6582, 6575, 6567, 6562 (major), 6557, 6550 (major), 6544, 6539, 6530-25 (major), 6511, 6506, 6499 (major), 6490, 6482 (major), 6476, 6467, 6462 (major), 6454, 6446 (major), 6436, 6425 (major), 6413 (major), 6399, 6393, 6380-84 (major), 6365, 6360 (major), 6353, 6349 (major), 6338, 6325 (major), 6315, 6306, 6296, 6290 (major), 6285, 6273 (major).
In terms of lvls I’d bid direct: I am still holding my 10% long runner from the 11:15AM Tuesday 6595 Failed Breakdown, provided back on Monday at 4pm, and broken down extensively in Tuesday’s newsletter. My most recent entry was the 12:45PM mini Failed Breakdown of 6848 we saw today. This Tuesday evolved into a 280+ point long. This was an incredibly low volatility, slow session in ES. As I’ve said many times, we need volatility to trade. Trading without volatility is like driving a car without gas – it just won’t go anywhere. Many of my followers are confused why I prefer trading downtrends to uptrends even though I only long and never short. Because downtrends have volatility and paradoxically there are far more long setups in downtrends than uptrends. On a red day, I may get 3 quality Failed Breakdowns as price cycles between fast sells and sharper squeezes. On a green day I may get one Failed Breakdown, then price will grind for 2-3 days with no setups often. Even though I only trade long, I make substantially more on red weeks than green weeks as a day trader. As day traders, we care about volatility, not direction. ES spent most of today in a tight range as it continued to digest this weeks 280+ point leg up. This range is mostly 6848-52 to 6872 and everything in this range = pure chop. 6848-52 is first support down and this has been tested 5x in the last 24hrs with one small flush today. I would not engage this zone again as it is too well tested, but if we can flush today’s 6847 low (perhaps down to 6840) and recover, this would be an actionable Failed Breakdown of the 5 touch support shelf at 6848-52 that formed between 1:40PM Thursday and 12:40PM today. Below there is nothing until 6819-22. This is a decent support, but remember my core rule in ES: No knife catching allowed in ES. If we are plunging full speed on some headline, never get infront. If we are knifing at full speed the much safer entry is to wait for a Failed Breakdown. In this case there are no significant lows nearby, but if we can flush 6819 and recover 6822 this may be a lower quality long. Below there is 6793. While one can bid 6793, there is a much safer entry. Specifically, at ~10:30AM Thursday, ES set a clear significant low at 6802 from which we rallied to the current weekly highs. The flush of this low and recovery is a quality Failed Breakdown ideal if it tags 6793 in the process. 6780 is below there. This was yesterday’s (Wednesday’s) low of day. A flush and recovery of this low is a clear Failed Breakdown and a powerful one. There is nothing below there until 6744 which is one zone of interest, and nothing below there until 6684 then 6662 which back-tests Tuesday massive breakout (this was the liftoff point)
Resistances are: 6862, 6867, 6873 (major), 6882, 6894, 6902 (major), 6912 (major), 6922, 6927, 6937 (major), 6943, 6949 (major), 6954, 6963, 6975 (major), 6983, 6994, 7003 (major), 7008, 7016 (major), 7021, 7027 (major), 7032, 7036, 7048 (major), 7052, 7053, 7057 (major), 7067 (major), 7074, 7086, 7094, 7100 (major), 7122, 7130 (major), 7139. As readers know I don’t short ES – I only get my points on the long side, but I still give short entries here for those who like them and don’t mind having a substantially lower win rate and lower R/R – SPX is a structurally bullish asset class green 75% of years over the last 100 years with a 1% annualized monthly return and even in bear markets it is extremely hard to short since the sells are short lived, news driven (often random) and resolve in violent rip (we saw a perfect example of this today). I have not had a single short in over a year now – phasing them out after 15 years – and my performance has never been better as my Failed Breakdown strategy outperforms even the strongest shorting strategies in downtrends and uptrends. For those who don’t mind the low win rate though associated with shorts though, 6902 is one spot to try, 6937 is another.
Bullish Case for Monday
Bull case Monday: Bulls are firmly back in control. Back on Monday March 30th, ES put in a huge Failed Breakdown where we swept the Sunday March 29th low/Monday March 30th regular hours shelf of lows at 6360 down to 6353. This was a huge institutional accumulation event and we got long then originally as I’ve discussed at length. Its been a straight rip higher. After this, ES spent April 1st to April 7th in a large sideways consolidation/bull flag. On Tuesday – driven by Iran deal headlines – this flag broke out and we went parabolic. The back-test of this is down at 6662 now and bulls are firmly in control above there. On a shorter-term basis though, ES spent this last two days in a tight flag 6848-52 to 6872. In an ultra bull case for Monday ES will just fill out this tight flag (perhaps trap below) then head higher. Targets are now 6882, 6902, then 6937. I usually give spots to add on strength but given how close to the highs we are and how low volatility is – this is risky. I won’t take this, but breakouts of 6872 are one possible entry for anyone desperate to trade.
Bearish Case
Bear case Monday: Bear case tomorrow: 6793 has to fail. These types of level loss shorts below a support are called breakdown trades. My core edge is failed breakdowns, and the reason is this is an edge is the vast majority of break downs (80%) trap. I do not take these trades personally. They take great skill to execute, and even when done well by a trader who has mastered these setups, one should expect over 60% to fail (they are low win rate, high R/R trades. 2 or 3 in a row will fail, then the 4th will pay out huge). *If you don’t like these odds and cant tolerate being trapped – simply don’t take them. I consider breakdown trades to be an advanced setup type so if a newer subscriber, there is nothing wrong with passing on these. For the 6793 short ideally one sees a final bounce there OR a failed breakdown. After this, one can short beneath the low of wherever that bounce is. Likely 6787 trigger.
Summary
In summary for Monday: ES spent April 1st to April 7th in a large sideways consolidation/bull flag. On Tuesday – driven by Iran deal headlines – this flag broke out and we went parabolic. The back-test of this is down at 6662 now and bulls are firmly in control above there. On a shorter-term basis though, ES spent this last two days in a tight flag 6848-52 to 6872. My general lean is to defer to the trend. ES can flag out more 6848-52 to 6872 (or quick trap below 48-52). From there next leg up sees 6882, 6902, then 6937. Bear case discussed above.
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