Tag Archives: firecracker effect

Balanced, Inside Day – Price Fills in Excess Between Distributions

market profile chart 04212017

With overnight inventory nearly 100% long, the ES opened a tick above unchanged on Friday but could not trade above the prior day’s point of control. The prior day late pullback low at 2351.50 offered no early support as price sold through the low of the upper distribution.

The low confidence, choppy opening continued in B period, with price testing the 2351.50 pullback low from below, to the tick, before printing a poor A/B low and closing as a small, three point inside, balanced bar.

split view market profile chart

Price couldn’t find any real acceptance back inside either distribution from the prior day, with Friday’s C and E period highs failing at the upper distribution low and the D period low bouncing from exactly at the high of Thursday’s lower distribution.

Friday’s regular session closed as another inside day, filling in the excess single prints between Thursday’s upper and lower distribution.

Entering the last trading week of the month, March is still printing as an inside month

ES-monthly-chart

The weekly chart is balancing, and was also an inside week

ES Weekly Chart

The daily chart is balancing, although one timefaming higher for five consecutive days

ES Daily Chart

Balance trading rules could apply in regards to the inside day, and also the inside week – look above or below the high/low and find acceptance, look above or below and fail – returning back into the balance targeting the opposite end (at minimum), or remain balanced (probably the lowest of odds). The longer a market remains within a balance the greater the odds are that a significant breakout will occur.

A potentially important early reference for Monday could be the very prominent point of control at 2347.00 from Friday’s inside day. Not finding acceptance back above the point of control and session close at 2347.25 could easily see price test Friday’s low at 2340.50, stopping the ontimeframing higher on the daily chart.

To the downside, acceleration below 2340.50 could easily see sellers test the April 20th low at 2337.25, finding acceptance below that level would bring the group of three daily lows at 2331.00, 2330.25 and 2328.75 (weekly low) into play, setting up another potential “firecracker effect” (a popular term coined by James Dalton), where hitting one set of stops triggers the stops below nearby price levels.

Taking out the prior weekly low (inside, balanced week) at 2328.75 could trigger further selling as there are now three weekly lows closely grouped together – 2328.75, 2324.00, and 2318.00 (also the March low). Trading below 2318.000 would stop the onetimeframing higher on the monthly chart and could result in a more serious change. More serious selling could bring the unfilled gap at 2312.75 from February into focus.

Although the odds for a downside breakout appear to be good, the market is in a tight balance nearing the end of the month. To the upside, if price finds acceptance above 2347.00 and can break out with continuation above Friday’s high, buyers could target the April 20th weekly high at 2358.25. A breakout of either side of the inside week (balance) could see either price acceleration higher/lower, or a look above/below and fail.

(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. DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Please read our disclaimer)

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ES Remains in Tight Balance, Setting up Potential “Firecracker Effect”?

The ES opened one tick above the prominent back to back points of control from the previous two regular hours trading sessions at 3454.00, then traded to just three ticks below it before accelerating higher, leaving a long string of single prints in the opening 30 minute (A) trading period.

split view profile in three day balance

With first half NYSE volume hour extremely light at just 244,000, the pace of the market slowed considerably by the second period, which traded in just a 2 1/4 point range. The high of B period was just a single tick above the recent two day balance high at 2361.25, a sign of weaker hands day and short term traders selling exactly at an obvious trading reference level. Price looked above that level in C period, but without finding acceptance above it, returned back into the two day balance, a classic “look above ad fail” market profile trading scenario.

The point of control began to develop 4 and 5 TPO’s wide at 2359.25 before a sharp liquidation break in E period accelerated price lower, back down through the excess A period single prints and the previous close. The selling took out the overnight low by two points in F period, but stopped two ticks short of repairing Friday’s poor low at 2347.00, a level which should be carried forward as it is now part of a string of daily lows grouped closely together.

three day balance s&- 500 emini futures

Failing to take out the prior day’s low, and with the wide POC above price, traders apparently found themselves getting short in the hole and short covered back into the initial balance and back through the point of control. Another trading session dominated by short term and day time frame traders.

There are now multiple daily lows tightly grouped together, setting up the possibility of what James Dalton calls the “firecracker effect”, where setting off one set of stops below a reference could trigger multiple stops from nearby price levels below it.

Value at the end of Monday’s session was overlapping to higher from the previous session, and Monday’s point of control ended up at 2358.50, just two ticks below its earlier high at 2359.25. It really didn’t migrate lower with late selling.

If price fails to break out of the multi day balance to the downside, and can successfully break out of the now three day balance above 2363.25 to the upside, potential targets (initially) are the point of control from April 5th at 2370.75 and the poor high from that session at 2375.00.

(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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Three Day Balance

Three day balance in the ES

three-day-balance-es

Thursday’s pit session ended with overlapping to lower value, but closed back within the previous two day’s trading range. Depending on Friday’s open, potential trading scenarios could be:

– Look above or below balance and accelerate
– Look above or below balance and fail and return back into balance, potentially targeting the opposite end of the balance
– Stay within balance

There are three similar highs now that are within one point of each other. Accelerating through 2141.25 could potentially set off a “firecracker effect”, where price hitting one set of stops can accelerate higher, hitting more stops above the prior highs. Price acceptance above those highs should see price fill in some of the single prints left from the October 11th selloff, and possibly close the Columbus Day gap at 2156.25, or price could return back into the three day balance if higher prices are not accepted.

Thursday left a wide point of control at 2134.75. Acceptance below that level, or if price opens below the POC and can not gain acceptance above it, opens the possibility of price retesting Thursday’s low at 2126.75. Acceleration through that level could bring the very prominent point of control from October 17th at 2122.75 and possibly the unrepaired poor low at 2117.75 in play to the downside.

(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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