Today is a perfect day of practicing what I have learned from Mike Bellafiore of SMB capital.
What a good trading is to identify a strong stock and build position when you see strong held bid. If the bids are rising higher, you add more to your position.
This morning, the DAX gapped down to take out the prior day's low and quickly reversed. From the tape, a big buyer showed up with a strong bid holding at 12925 when the price trades back into the range. By then I was just sit down and doing my morning prep work. So I didn't trade into the first held bid.
After the open, DAX was quickly on the bullish binge that levels are taken out one after another. For a while, the DAX was quite easy to trade. All you need is to trade the old resistance as the new support. Then the big buyer appeared again and again in the low of deep pullback legs. What I was doing was to add position into those rising strong bids. But after 10:00 AM, the order flow slows down and DAX started to trade in tight ranges. I have started to get impatient. After the first break of the rising trend line, I have closed all my longs. This was clearly a mistake as the strong buyer showed again, not at the trend line, but at the VPOC of the day at 12984. The buyer staged one last upthrust before the lunch time. I have missed that one completely.
After that last upthrust, the strong buyer left and the bearish rotation starts. Basically, the lesson I have learned today is that for each entry I have to think about two instances -- 1. the naive entry which is the way retail traders sees; 2. how the market maker and algos see the landscape. By looking at the naive entry, I could pretty much foresee that the market maker is going to run those orders before their real moves.
Anyway, today is not a bad day for me. But I still got so much to improve how I read the tape and manage my position.
I think very few people are going to argue about the fact that DAX has changed its character after the big long liquidation bar occurred in the first hour of last Wed's London session. Yesterday's break has confirmed the range between 12935 to 13000 was merely a re-distribution range. In fact, there were some sign of strength appeared in that range and i was to believe that DAX is ready to break to the upside during yesterday's NY session.
The technical setup was proven wrong -- large supply appeared out of no where after the Trump twit. That is possible that those selling were purely short term technical trader's intraday play, because DAX has retraced nearly 100% of the NY session down move in the overnight session. However, it is a tall order to hope the DAX would be back on its feet to continue a bullish drive to make a new high. As a matter of fact, the volume built around 12980 would serve as a strong resistance. So long as DAX is trading below that pocket of volume , I am going to maintain a bearish bias.
Today's trade plan is to build a core short position when DAX trades into yesterday's range. If it were to break 13010 to the upside, then the core short would be stopped out and I would seek to establish a core long position.
I think very few people are going to argue about the fact that DAX has changed its character after the big long liquidation bar occurred in the first hour of last Wed's London session. Yesterday's break has confirmed the range between 12935 to 13000 was merely a re-distribution range. In fact, there were some sign of strength appeared in that range and i was to believe that DAX is ready to break to the upside during yesterday's NY session. The technical setup was proven wrong -- large supply appeared out of no where after the Trump twit. That is...
Ignored
This is what happened yesterday i think a move to a weekly target at 216 fib
The cash session VWAP is holding for now. See what the market maker is going to do from here.
Plenty of supply present above 12935 resistance level that I have identified.
A strong hand is buying up the market. He is saying trade on the long side by following my lead.
I am going to take out my longs if the strong buyers are gone.
What an impressive run in DAX. It is trading at the monthly VPOC 12985. If it were to break this level decisively, then the bias would be shifted to bullish again.
In my opinion, that drive was merely a short covering rally instead of genuine buying. So we should not be panic but should look for strong offer to sell.
Maybe options sellers (market makers) are just waiting and doing what it takes to maintan price @13000 up to 13h00, options settlement time, then, after such a long parking at VAH, I would expect a move to the downside, say back to today's POC 12794?
Today is another day you should trade without any pre-conceived bias.
Most people come into this session with a bearish bias. But the strong buyer showed up multiple times holding the bid firm. By raising the bid higher and higher, it is able to squeeze the bears with the maximum pain and making himself a nice profit.
This is what we call trading not investing. It is not about picking tops and bottoms, but about following the tape. Let the tape talking to you and you just follow the lead of the tape without any pre-conceived judgement or bias.
Maybe options sellers (market makers) are just waiting and doing what it takes to maintan price @13000 up to 13h00, options settlement time, then, after such a long parking at VAH, I would expect a move to the downside, say back to today's POC 12794? {image}
Ignored
Guidoisot,
It is very likely that DAX price is manipulated by the market maker for whatever their purpose. Option is the prime suspect.
What I have seen from the tape is the up moves are very deliberate in face of strong selling pressure.
I feel that the tape is changing. We have seen the high of the day and the bearish rotation is coming.
The operator cannot hold bid like this much longer.
A market like this is quite difficult to trade as the volatility is simply off the charts.
Yesterday was supposed to be a boring day as the NY and London were closed for holiday. But Frankfurt was able to bring some fireworks by themselves.
The morning has opened with squeezing the shorts in mind, and once the sell orders are executed by the market maker, they just let the price go. The two legged selling has achieved 100% projection target to the tick, which is saying mechanical selling taking place here.
As we are writing, the DAX is trading below last week's low. The rule of thumb for DAX is don't sell below major level. That is where the market maker is selling. Market maker always sell into a high volume area where he can hide his orders. They usually test below support to grab weak inventories.
I am watching the level 12800 like hawks to see if it is able to trade back in that area. If it is rejected, then a down side extension is on cards. Otherwise, we could expect another short squeeze for from the market maker, because I am sure that they have a lot of short orders to execute.
The bottom looks really weak that it might be a double bottom manufactured by the market maker.
Note that double bottoms and tops are always run by the market maker.
The bottom looks really weak that it might be a double bottom manufactured by the market maker. Note that double bottoms and tops are always run by the market maker. {image}
when DAX in free fall, it is time to watch the longer term chart.
The prior band of resistance at 12650 could act as a support now.
But don't buy into the level blindly. Always seek confirmation from the tape.
Let the tape talk to you.
