Market Profile “B” Formation

Price opened within the previous day’s trading range in the S&P emini futures Tuesday, the A period high mechanically traded to just one tick below the prior days close, B period took out the A, but failed at one tick below the overnight halfback, the mechanical trade continued. Price was not acceptance above Monday’s close/prominent POC Tuesday.

market-profile-b-formation

The B period high reference, 2145.75, can be carried forward for future trading sessions as it can be considered to be a weak high – price reversing at such a visual short term trader’s reference. Visual short term traders references like this have good odds of being revisited either later the same day or in a future session.

A break in C period, selling off from the prior week’s high, filled Monday’s gap. There was heavy futures volume at the 2137.25 level. D formed inside bar, E looked above it, filling the A period single print and preventing the double distribution, but reversed at the session’s halfback level/previous low, more evidence of short term traders controlling price action and trading off of exact references. The remainder of the session chopped around in a balance, forming a wide point of control at 2138.75.

Wednesday’s profile has the classic “b” formation, implying the market was too long in the short term. Opening below and not finding acceptance back above Tuesday’s POC could easily see price test Tuesday’s low at 2135.25, acceptance below that level could target the multiple anomalies in the profile from Oct. 21st, along with that day’s low at 2123.25. There still remains the unrepaired poor low from Oct. 17th at 2117.75.

Opening below Tuesday’s point of control on Wednesday could see price gravitate back up to 2139, immediate resistance references above the POC include the prior weekly high at 2142.50, trading range high at 1143.25 and Tuesday’s high at 2145.75 – which can be considered a weak reference as it was just one tick below that session’s overnight halfback level. Above that is the weekly trend line, which if tested on Wednesday should be at the 2155 area.

(the above post and all posts on es-traders.com is an interpretation of market generated information using the Market Profile, and the information contained within is to be used for informational purposes only and not to be construed as investment or trading advice. Please read our disclaimer

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Low Confidence, Choppy Trade After Gap Up Open

The ES pit session gapped open 11 points higher from the prior close on Monday. Overnight inventory was 100% long, following net short inventory from the previous pit session close.

The overnight session traded through the three similar daily highs and into the single prints from Oct. 11th., but the pit session couldn’t find acceptance above above the overnight high at 2147.50 and chopped around in an 8 1/2 point point range. Monday’s pit high was 2149.00.

mechanical-trading-es

The ES has been dominated by short term traders. Short term trading technical indicators include trend lines. If price can find acceptance above Monday’s high at 2149.00, the trend line on the weekly chart could be tested, which would also aligns with the closing of the Columbus Day gap at 2156.25:

es-weekly-october24-2016

If Monday was a true break out of balance to the upside, rather than just overnight session traders running stops above those three similar daily highs, then price should not immediately find acceptance back below the previous weekly high at 2142.50. Volume and pace on Monday was not supportive of a breakout.

Failure to find acceptance above Monday’s close and wide point of control at 2144.50/75 could easily see price test the previous weekly high at 2142.50 again, followed by Monday’s low at 2140.50. Acceptance below Monday’s low might see an attempt to fill Friday’s gap at 2136.75 and potentially target the anomalies from Friday’s profile.

(the above post and all posts on es-traders.com is an interpretation of market generated information using the Market Profile, and the information contained within is to be used for informational purposes only and not to be construed as investment or trading advice. Please read our disclaimer

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Mechanical, Slow Paced Trading Session in ES

With overnight inventory virtually 100% short going into Friday’s pit session, the ES opened with a small gap lower (1 1/2 points), quickly filled the gap at the previous day’s low and pulled back to the Oct. 17th pit close at 2123.25 – which was also just one tick below the the overnight low and two ticks above the Oct. 17th prominent point of control, a very visual, mechanical short term trading level.

es-look-below-of-bbalance-and-fail

Very prominent, unrepaired points of control in the market profile often act as magnets for future trading sessions.

Friday’s pit trading session was a grinding, slow paced, low confidence session that traded off of very visual short term trader references, including:

  • The low of the day was just one tick off a previous close/point of control
  • The B period low was just one tick above the session open
  • C period initially stalled at the 2131 overnight halfback level
  • The I period pullback was from the then-current half back level
  • The L period high of day stopped just one tick short of the previous day’s pit close

Because it was at such a mechanical level, Friday’s high at 2136.75 has good odds of being tested on Monday. Acceptance above that level could see price test the Oct. 20 high at 2141.25, the Oct. 19th 2142.50 poor high and the Oct. 14th 2143.25 high. Hitting stops above those similar price levels could potentially see price fill in some of the single prints left from the October 11th selloff, and even possibly fill the Columbus Day gap at 2156.25.

The ES is one timeframing lower on the daily chart for three consecutive day sessions. Failure to trade above 2136.75 keeps the one timeframing in tact.

Friday’s profile also left multiple anomalies. That information can be carried forward as anomalies are structural weaknesses often created by emotionally driven traders, such as short covering, and have good odds of being repaired in the next or future trading session after they were created.

To the downside, the B period low – one tick above Friday’s open – also has decent odds of being retested.

The unrepaired poor low still remains at 2117.75.

(the above post and all posts on es-traders.com is an interpretation of market generated information using the Market Profile, and the information contained within is to be used for informational purposes only and not to be construed as investment or trading advice. Please read our disclaimer

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