Missed the best setup

During August my strategy is always to plan a few trades before the open, try and get on the end of those trades, (parameters permitting) and then sit back. Usually there are one or two more setups later in the day, but for me I like to get my trades done in the first hour during the summer.

So today I had a couple of plans, one was a small oil short. This is the second gap up in a row now with both gaps being above the prior high. The plan was to short the open (pit open) with a target of yesterday’s high and a stop 20 cents above the overnight trade high $82.61. This was only going to be a small one, I had a stop in place and an alert set at $81.80 I didn’t want it to distract my DOW focus at the open.

On the DOW my thoughts were, either a gap fill, or a push down to some support levels. 10,600 DOW cash was the obvious one. We were due some data at 3pm so in my eyes it’s two separate time periods. Pre data and after data, the game could change completely.

We opened about -28 and proceeded to rally 12pts or so, the ES wasn’t really following the DOW which is one of my red flags, but i wasn’t too concerned and waited for a pullback to jump in long for the gap fill. The pullback came and on the high tick reading I went long. I got a pretty poor price unfortunately, maybe I was a bit slow with my market order, but the market was half way back up towards the prior high before I got my fill!
That skewed my R/R slightly and only really gave me a 15pt or so target. I was going to keep the stop tight on this scalp play, any probes under that last swing low I would be halving the position if not cutting completely. With a 15 point target on a scalp play you can’t be letting the trade go against you 30-40 points.
Fortunately it continued to pop and I started to scale, the candle bodies were getting smaller and smaller and I had a third of my position left. It couldn’t just squeeze the last few drops for the gap fill and dropped back pretty quickly. I scratched the last at breakeven.

Meanwhile my oil alarm was triggered, I looked up to see a nice push through my 77 level, so I closed my short +54.

I sat on my hands until 3 and watched to see the market reaction, the cash gap had not been filled nor had 10600 been tagged. A good move in one direction or another would get me interested in either of those plays.

The data was perceived slightly weaker (no idea what the number actually was, nor do I care!! I’m only bothered with the candles that follow it :) ) The market paused shy of 10600 and popped back up.
It was a bit of a 50/50 trade for me, was that close enough to call it a tag? Was the data weak enough for a follow through?
I took the short anyway, the market sat around for an age, it put in a high tick reading and it looked as if the trade was a duffer, but the sellers found a second wind and pushed it to tag 10600 just!!, I closed.
There was no way I was hanging around for a push through, the volume was low and I was becoming less convinced about the trade. So to make it three out of three on the first hour was pleasing.

Of course the far far better trade in hindsight was the long at 10600 for a push back up into the day’s range.
But I didn’t take it. Why?
1) Because I felt like I’d got away lucky on the last trade
2) I am well aware of yesterday’s low as a strong target for the bears, there’s a big gap left to fill underneath it so it needs to be kept in mind over the next few days.

So that held me back from the better setup.

Here’s the gap to be aware of