Morning Reversal Strategy Chart

[Soultrader 12]

Here is another morning reversal setup. Lower volume as price declines. 5min doji appears near the previous day low and value low, support 1 cluster zone. We also have a new TICK high and BAM!

 

Price has rallied approx 30pts from the lows on this chart. I will try to post another chart at the close. Price should rally into the close in my opinion.

 

[notouch 10]

Often there's a pullback either to a Fib level or to just below the low of the day before it takes off in the afternoon session. Again it's a case of looking for reversal candlesticks and lower volume on the lows or increasing volume as it reverses.

[walterw 10]

I understand Soul that you would at least expect to see a closing gap...

[Soultrader 12]

oops.. I guess I was wrong. Price did go on to rally towards the daily pivot (almost gap fill). Then it took a nose dive!

 

Gap fills will often act as strong support and resistance.

 

[notouch 10]

The warning signal was the low volume coming in at the lows compared to yesterday's volume, suggesting lack of professional participation.

 

I love hindsight analysis

[Soultrader 12]

hehe... one question though. Yesterday we had unusually high volume compared to the past trading sessions due to Fed day. When I saw it in real-time I looked back 5 trading days and felt the volume was enough. Obviously I was wrong in my analysis. (did take a few points on the long side though)

[notouch 10]

Looking at the first half hour's volume over the past few days it has been over 10,000 on YM whenever the morning reversal occurred. Today it was under 10,000.

[MrPaul 10]

Soul,

 

I find that to be a good trade imo, I went long the ER2 inside a similar setup and took some profits before price declined. The selloff was mainly due (at least in the big S&P) to institutional sell stops being taken out.

 

[Nick1984 10]

Quick entry note: Personally, I had almost the exact same trade as you James, except I went long at the point where you have a TICK hook at the 0.

 

You can see however that after the small price rally the volume does stay very low and it was making me very nervous so I pulled out relatively early and then waited for the pivot and was lucky enough to go short and catch part of that first move down.