Potential island reversal or new trading range? The ES gapped open higher to begin the Christmas holiday trading week, trading in a balanced, small 6.5 point range. Euphoria over Trump’s tax plan still dominant.
Often, since large gaps are rarely filled the day or day after they’re created, when the market gaps open by a large point amount it can be the beginning of a new short term trading range.
Monday’s market profile chart featured a very prominent point of control and a poor high, also another new all time high. Balance trading scenarios could apply:
– look above and repair the new all time high (poor high) at 2698.00 targeting the 2700 price level, finding acceptance at higher prices.
– look above repair the poor high and fail to find acceptance, trading back into the prior range and targeting the wide POC, potentially the low of day and gap below. Gaps are a form of excess, they can be visualized as single prints on a market profile chart.
– look below Monday’s range and fail, return back into balance, targeting the wide POC and potentially the poor high and 2700 level.
– look below Monday’s range and find acceptance at lower prices, targeting the excess and potentially the ufilled gap from 12/15.
Another possible scenario would be to remain balanced around Monday’s range, which could be more likely considering the lightened holiday volume, barring any significant outside news events.
Note: There are currently four unfilled gaps since November 15th below the current price. This is highly unusual, poor structure that was likely caused by emotional momentum type short term and day time frame traders. The odds are very high that some of these gaps will be filled in in the near future.
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