Volatility is back……

Well it’s been a while since we’ve seen a 200pt range on the YM during the cash session. Month end, quarter end or a combo of data and key levels, whatever it was we got some good action with lots of great setups.

Getting the day going on the right foot was the classic buy the pause/pullback after a reprice trade. Data came out, spiked the market………we wait and we wait, the pullback begins, in goes the small downtrend line. All we do it wait for the break upwards to confirm with tape. Target was the prior day’s high, stop under the last low.

So I went into the open flat as usual, noting that at 10840 there was a very active seller on the tape. With that in mind I watched the open to see how it was going to react. The cash opened and it immediately pushed up to the 10840 level, it stayed there for 3 minutes, banging it’s head several times and doing a lot of volume.
Was there good buyer at that level? Definitely.
Were the buyers aggressive? Yes, they were hitting that offer like crazy……….

But throughout all that the seller stayed firm. He lifted a few times letting the price pop a few ticks only before taking all the bids back to 10840 offer. This is nothing more than tape reading, I took a screen shot of the DOM as this was happening and you can see the amount of volume traded at 10840 compared to other levels as indicated by the green bar.

To me this is well worth a short, if only because the risk is so low. The premise is that this seller will stay firm, buyers will get fed up and begin to sell, pushing the market lower. The stop can logically be at 10845 as if he lifts the premise has failed and you want to exit. 6 ticks of risk.

It gave 15 ticks before I had to close prior to the PMI data. Due at 14.45GMT but released to members 3 minutes prior.

I took the 50% pullback long as per usual after the next leg up. But this time we didn’t revist highs, 10ticks was the most I could squeeze from that………….Frustrating not to get more but very useful information.

A market that pulls back after a solid push higher and hardly attempts to revisit highs is a signal that buyers are no longer interested.

All I needed now was a nice low risk good trigger for a short. It took a while before I really felt confident to short it with some conviction. The market broke lows cementing my conviction for a good short………but I wasn’t short yet!! I needed to find a good entry.

The pullback after the break was a perfect place to get short, the market pushed to new lows allowing me to scale off some of the position, but I really thought there was more to be had, so looked for another place to get short with my eye on a gap fill as a target.

I knew I was going to potentially have to sit through a larger counter trend cycle, but if you want larger targets you unfortunately have to sit through a larger counter trend move.

The second time the market couldn’t put in a new high was my signal to really press the trade. I sized up with a stop above the swing high………..bingo, the market cracked and I got my gap fill.

I thought a 43tick profit was a good trade, little did I know the market would fall a further 80 ticks!!!

I was tempted to call it a day after 4 out of 4 good trades but I just couldn’t resist taking a sneaky long after the classic volume flush, low tick, tail forming action on the 1 minute.

That was good for a quick 20ticks of profit without pushing my luck too much.

Wanting to end the day, month and quarter on a high I closed my primary brokerage account and sat back and watched the subsequent action on my charts. Was I concerned I might miss a good trade, yes of course, the market action was good………But, the potential frustration from outstaying your welcome in the market and getting caught in a bad trade undoing all your good work and ending the month on a sour note is more psychologically damaging than making another 20 ticks on another trade. I’ve been there several times in my 9 year trading career and I now know better!!!

A great end to a good September, looking forward to some more volatility during October.