April 4 ES Levels and Gameplan: ES Down 560 Points In 36 Hours
Clean slate this AM... waiting....
If the same 36 hours happened to me 10+ years ago, I’d be freaking out.
I would’ve probably bought and sold 50 times.
I’d be catching knives, selling once stopped, taking little profits, hoping for homerun rubber band snaps, and ultimately… losing.
I’ve receive many DM’s in the last 24 hours:
What’re we doing?
When do we buy?
Should we sell after this bounce?
Let’s remember to breathe.
It’s easy to get carried away after a day like yesterday and into this morning.
What we do with our trading has nothing to do with large percentage moves in price
Our trading relies on setups.
It relies on risk/reward.
OK… violin played..
Let get to it.
Yesterday I started my letter with this quote:
“The human side of every person is the greatest enemy of the average speculator.”
- Jesse Livermore
The last 36 hours has been brutal for bears.
2 Trillion Dollars was evaporated (maybe 3T as of this AM) by yesterday’s selloff.
I took this picture and send it to my father at the end of the day yesterday:
S&P closed down nearly 5% and we continued that selloff to a nearly 3% additional selloff this AM.
Just look at the headlines in the last 24 hours by Google S&P news:
My job isn’t to reiterate the price action happening it’s in ES.
It’s to identify areas of opportunity. If you’re trading without using rules, like the ones we have in our Core Strategy, you’re gambling.
More specifically, buying irrationally on the hopes this selloff is overdue, is for DEGENS.
You’re better off going to Vegas and playing roulette. If you’re trading in this environment, thinking every move in price is a trading opportunity, you’re going to pay a hefty tuition fee.
Every move is not an opportunity
In yesterday’s letter I noted:
People are fairly simple creatures when it comes to the following emotions:
Greed
Fear
Desire
Content
Hope
Despair
Anxiety
It is my purpose of ESDaily to eliminate all of those and trade using a system.
Our job isn’t to catch 300 points on the ES in a day like today.
Only take the Grade A+ setup ES offers a few times a day.
We need to take a PIECE of the action, not get all of it…
It is a system.
So real quick, let’s recap our ESDaily Scoreboard:
20 Trades Since March 14.
15 Winners
5 Losers
We use The Core Strategy and discipline required to be succesful…
This has resulted in a 75% win rate since our March 14 inception. Our profit taking strategy of the majority of profits at T1, more at T2, perhaps more at T3 and leaving a runner make this system work.
But, what I think matter’s most…. look at the reward to risk. a 6.27:1
We don’t need to panic, get greedy, or be anxious about big movements.
Yes, I get it.
I fully understand massive selling results in snapbacks, pendulum swings and quick action:
In fact, I wrote this yesterday afternoon about a text exchange with my sister.
“Down 4% is the literal definition of a puke. A puke always results in a cleanup. The rubber band snaps back. The pendulum swings… Whatever phrase you want to use, we’re looking at human emotion.”
But these emotions help drive trend in ES and you can read them, you can see them on a chart.
Buying stocks today for the forever account is something I did. I think buying SPY and waking up 6 months from now, most would be happy.
But as traders, our job it to take profits when they are due.
It’s not the same as investing.
Our job is to trade… take Grade A+ opportunities…. take T1 using our 60-75% profits, T2 at 10-20% and so on…
Our job is to make money, not predict the future
Yesterday trades….
April 3 - 2 Trades, 2 Winners.
I wrote about this in detail yesterday afternoon, you can find it here:
Trade #1 April 3, 5010 Reclaim
Here’s a chart of the trade before the explanation below:
In the chart above we can see a 6:45AM EST low of 5503. We rallied from there back up inside the range the 5536 or so, before selling off premarket, finding a bottom at 5491. 5491 was the same area we got long yesterday after the initial collapse on Trade #1 post market. Interesting to see this area be the same bottom just 10 hours later.
As we accepted, and then recovered, we can see price reclaim the 6AM-7:40AM lows. Momentum shifted short term, and the simple trade was a 5510 reclaim long with T1, just at the 3AM low basically.
Because we hit this zone and entered the trade pre-market, I was inclined to respect overnight levels, especially on such a selloff. Within 1 minute of the regular trading hours 9:30AM EST open T1 was hit from 5510 to 5524.
I wrote:
I should’ve added…
Not being a hero means:
- Not taking excessive risk.
- It means adhering to our reward:risk rules.
- It means taking profits when they are due (at the next level up).
- It means not thinking just because we bought, markets will move straight up.
Now:
On a day with 4X the usual volatility, it’s prudent to take additional risk reduction measures. We can do that in a few different ways. We can reduce the size of the position and/or limit the stop size and/or trail our stops quickly.
Yesterday, our 5545 long trailed out on the selloff to 5665. This left me to open the chart today with a clean slate and no positions.
My thought position was we either create new lows here, OR 5510 reclaim leads us to atleast 1 level up on the open. Both were correct.
But, upon entering the trade we took a full size position, hitting T1 within minutes, and simultaneously reducing the risk of the trade by dragging my stop to breakeven. This was just one tick above the entry, at 5511.
Price ultimately came within 5 points of our second target at 5540.25 (T2 was 5545) before turning around and stopping us out for a 14 point gain on 75% of the contracts taken.
At 9:50 I wrote:
As we awaited price discovery, we found ourselves 90 points lower than the 5540.25 high at 11:05AM EST.
As the low was in place we saw a reclaim potential, once again at the 80-85(D) listed in this AM’s write up. This allowed us to get into
Trade #2 April 3 - 5479.50 Reclaim long
Here’s what I wrote at 10:39AM:
“The reclaim back into the 85-80 demand offered a long. We are long at the market and filled at 5479.50.”
Though it took longer than Trade #1, we hit T1, taking 70% by 12:04 PM.
I noted:
By 12:33 PM T2 was taken at 5519 (15%), and we ultimately came back and stopped out at 5480 on the remaining 15%.
By 1:30PM EST I was done trading for the day, and started piecing together this afternoon letter to give as much input as possible.
At 1:30PM, I wrote:
In a day that started 4% down, we’ve held in that same vicinity all day back and forth between the gap and 11AM low.
Though that may be true..
We saw price oscillate 40 points or more 7 separate timesHere was the daily action:
This morning I woke up to another massive leg down in ES.
In planning my trades I wrote a comment on X at 6:41AM EST stating:
Price was here:
We got to 5919.75 before selling off another 120 points.
Therefore no trade there, and we simply wait…
I’m sure there were opportunities presented before this letter is posted. We’ve seen multiple 50 point swings since 6:30AM.
…Remember, we may just be provided 1 great opportunity a day. We don’t need multiple.
If we nail it, cool.
If we miss it, cool.
Don’t go seeking more action unless it fits the plan.
We need to take a PIECE of the action, not get all of it.
I know this sounds repetitive, but it’s just so, so important when it comes to successful trading and making a career out of this.
Price down 4%, cool, are there opportunities?
Price back up 2%, cool, are there opportunities?
Price back down 3%, cool, are there opportunities?
In times like this, where we seeing massive selling, I can’t stress enough the importance of not falling into the retail trap…. thinking you need to trade more than you do.
The opportunities will come.
So where does the next "piece” comes in as opportunity?
Critical Areas-
Below are ES levels I’m watching as of 9:30AM EST 4/4
Support/Demand- Support is not the same this as demand. Demand is high quality institutional levels we can see on the chart. While we seek demand, we may find opportunities for longs using support/magnet levels. We can find “subprime” areas of opportunity that price may use as bouncing points. We always want to ensure momentum is on our side in this case. In the section below, you’ll see areas of interest. If I consider them Demand, you’ll see a (D) followed by price.
Likely Supports For 4/4 are: 5250 (D), 5230 (LTB), 5208, 5195, 5185, 5151
Resistance/Supply- Supply is not the same this as resistance. Supply is high quality institutional levels we can see on the chart. While we seek supply, we may find opportunities for shorts using resistance/magnet levels. We can find “subprime” areas of opportunity that price may use as bouncing points. We always want to ensure momentum is on our side in this case. In the section below, you’ll see areas of interest. If I consider them Supply, you’ll see a (S) followed by price.
Likely Resistances For 4/4 are: 5308, 5319, 5337, 5352, 5375-5395(S), 5407, 5427, 5457- 5483 (S), 5499, 5523, 5533, 5566
In terms of direct bid/asks
Above 5267/5327 offer a reclaim long. I’m not huge on knife catching, but we can look for price to find our support/demand areas, accept and buy on reclaims above the area.
A new low of 5210 offers a breakdown short. Remember, failed breakdowns make up a huge component of our trading strategy, but one could issue a sell direct on a breakdown from this area to the 5195 support.
There’s also a 20 point zone at 5375 that may offer selling opportunity but it’s critical to watch the RSI on the 30 minute as we approach that area. These overnight levels, while can work, can easily be blown through with too much momentum.
See the momentum rules here:
No need to be a hero and bottom pick.
Remember, our job is to protect our capital, not catch highs and lows and swing for the fences.
We’ll have to wait and see what price delivers today
As always, stick to the plan.
Trade like a Robot, and tomorrow, let’s make it a great Friday and end of the week.
-PT
I’m going to add a P.S. here again…. because it’s just so, so important:
Don’t go seeking more action unless it fits the plan.
We need to take a PIECE of the action, not get all of it.
I know this sounds repetitive, but it’s just so, so important when it comes to successful trading and making a career out of this.
Price down 4%, cool, are there opportunities?
Price back up 2%, cool, are there opportunities?
Price back down 3%, cool, are there opportunities?