iBankCoin
Home / Opening Swing

Opening Swing

Let’s Take A Look At How Futures Traded Monday, After The Pro Gap Up

Pro gap is loosely defined, per my own statistics, as a gap greater than 40-60 points on the NASDAQ, roughly.  Greater than 60 points and we truly are dealing with something unique. Let’s discuss the forces behind a pro gap and the implications they carry into the trading day.

A gap usually occurs when information deemed material by investors and traders is discovered outside of open market hours (9:30am-4:15pm, New York Time).  When the market resumes trading, many participants (including institutional, the higher or ‘other’ time frame) are put in a position that may require them to adjust their exposure.

In Monday’s instance, the large move higher may have pressured short sellers to cover their positions, creating a natural demand force inside the market.  The move was deemed macro driven, tied to the first round of French Elections.

And buyers were the first ones to attempt a move after the opening swing, but by late morning, NQM17 (the front month futures contract) had fallen back around the opening prices.  This is when the day became interesting. The first trade of the week set up, a zipper, affectionately named by the image it resembles on my renko trigger chart. See below:

The trade was scratched at cost.  I managed to cover one unit at the exponential moving average then due to the day’s context scratch the remaining units instead of re-adding to the shorts and pressing for the range extension down.

Range extension is a move beyond the first hour’s range.  Understanding range extension is only important because it unlocks a high probability edge for day trading.  You can run a study yourself (and you should for added conviction) where you calculate what percentage of the time the first hour’s range is exceeded.  It happens 94.3% of the time.

94.3% probability, does that sound like an edge to you?

The trick of it is guessing which side of the range is going to break.  On a big gap day like today’s, the range extension could carry big order flow with it, and implications that could last days, even weeks into the future.  Historically, the high of the 1st hour’s range (aka initial balance) is taken out 66% of the time, while the low is breached 52% of the time.  The high breaks more often mainly due to the long term trajectory of the NASDAQ, which is up.

Below you will see Monday’s initial balance, which is clearly marked—observe:

When sellers failed to take out IB low it became evident that the primary expectation from this morning’s trading report was still in play.  For added context, we had a clear pivot zone, the old zipper that triggered the late-morning short trade.

The final layer of context is a statistic that needs to be dug up (it is archived in the laboratory somewhere, SMH) which states that if a gap outside of the prior day’s range is not filled by 1pm, the market is likely to continue in the direction of the gap.

Mix all these little contextual quirks, expectations, trade set-ups, and high probability events and you have an excellent foundation for justifying taking longs—afternoon day trades.

Overall, the day had a wait-and-see feel to it, with buyers hardly initiating fresh risk beyond opening balance.  This suggests the institutions are waiting for more information before they become aggressive in either direction.

In short, it seems, for now, the market remains out of balance which means it is interesting.  Interesting, because of the potential opportunity it holds.

 

Comments »

Opening Swings – Buyers Rule The Roost in The Short Week

The holiday drift was in full effect last week and there were not very many opportunities to trade the short side of the tape.  Overall we saw very methodical auctions where the market set a low bid and then auctioned higher.

I highlighted the opening swings, except for on Tuesday, the strong trend day, which did not print an opening swing, instead only driving higher.

I have highlighted some of my best and worst trades of the week as well, enjoy:

MONDAY:

06302014_os

TUESDAY:

07012014_os

WEDNESDAY:

07022014_os

THURSDAY:

07032014_os

 

Comments »

Opening Swings – The Freedom To Form an Analysis

Freedom is kicked into high gear this weekend as we prepare to celebrate Independence day.  The weather up north is paradise, something we patiently wait all year for.  With that in mind and family and friends arriving in town, I took a brief moment to work through the Nasdaq opening swings from last week.  Skipping an analysis of last week’s action with all the festivities as an excuse would be a shame because the action was so dynamic last week.  The market is coming to terms with swing highs with only the Dot Com bubble peak above.  These truly are interesting times for our country and its markets.  If that doesn’t excite you enough to dig into some charts, then I am not sure what will.

Let’s have a solid holiday week.  And what better way to kick it off then to wrap your mind around auction theory and how it can assist you in the daily navigation of our electronic markets.

MONDAY:

06232014_os

TUESDAY:

06242014_os

WEDNESDAY:

 

06252014_os

THURSDAY:

06262014_os

FRIDAY:

06272014_os

Comments »

Opening Swings: Less Noise

I migrated to a renko chart this week.  I have been observing the renko alongside my minute chart for several weeks, seeking to locate consolidation patterns on the renko when I liked where the minute chart was.  The more I thought about it, and back tested, I noticed I could eliminate the minute chart entirely.  I have talked to several traders who scalp from minute charts, and several who are still recuperating their losses.  Unless you are a thoroughbred scalper, you may want to focus on finding 2-3 spots per session to work from.  With that in mind, the renko is great.  You need to tweak the inputs a bit and observe and backtest the size of the bars to fit the market you trade, but once you do the consolidations can be seen with less noise.

I present the opening swings this week on renko charts.  Because they are not time dependent, I have noted the globex/cash sessions.  I have noted other key observations as well.  And finally below is a snapshot of the entire week’s auction.

MONDAY:

NQ_os_06162014

TUESDAY:

NQ_os_06172014

WEDNESDAY (FED DAY):

NQ_os_06182014

THURSDAY/FRIDAY:

NQ_os_0619&202014

WEEKLY AUCTION SNAPSHOT:

NQ_weeklyRecap_06212014

 

Comments »

Opening Swing: Digging into The Data

The opening swings started to pile up this week before we ultimately broke lower.  How this break resolves will be interesting this week.  We saw a responsive buyer on Friday, but there was also a seller active.  I have highlighted the opening swings below.  Following the normal weekly opening swing analysis is a zoomed out view of the auction and then some statistics on opening swings since we began this study.

Enjoy!  And if you find this work interesting or valuable, share it with your people.

MONDAY:

06092014_os

TUESDAY:

06102014_os

WEDNESDAY:

06112014_os

THURSDAY:

06122014_os

FRIDAY:

06132014_os

WEEKLY AUCTION:

Week2June2014_os

STATISTICS:

OpeningSwingHistogram_NASDAQ

Comments »

Opening Swings: New Month, New Money

There was plenty for the market to digest this week, and we started with paused action which eventually gave way to buying.  The week provided lots of high probability trades for the prepaired and patient morning trader, but the lunch hours and afternoon were much more challenging.  It begs one to question what there trading hours could be and reminds me of an ancient Chinese proverb:

If you must play, decide on three things at the start: the rules of the game, the stakes, and the quitting time.

Those are three point any trader should give serious thought to if they plan to take on the elite traders of the electronic markets.

Take a look at the opening swings, and see for yourself the affect they play as price walks along through time.

 

MONDAY:

06022014_os

TUESDAY:

06032014_os

WEDNESDAY:

 06042014_os

THURSDAY:

06052014_os

FRIDAY:
06062014_os

Comments »

Opening Swing: Thin Volumes and Dicey Action

With summer warming up in the northeast the trading week had a feeling of emptiness.  The fine weather may beckon otherwise retail participants to instead explore outside activities, leaving only the most hardened and skilled participants around to do battle in the electronic futures performance arena.

Drone strikes can be particularly effective in this environment, and we saw a few midweek.  Overall, my algos were quiet, only triggering once into the bell and late into Friday’s trade.  With the market thin, it paid to be patient and really allow the market to come into the thick midpoint of trade before attempting entry.  You will see all of this, and more, on the following opening swing charts.

Note: Monday trade is not included as it was an USA holiday.

TUESDAY:
05027014_os

WEDNESDAY:

05028014_os

THURSDAY:

05029014_os

FRIDAY:

05030014_os

 

Comments »

Opening Swing: The Holiday Grind

Traders often look for the markets to behave a bit lazy as we head into a long holiday weekend because the normal participants are perhaps skipping out of the office early or checked out mentally even if they are at their workstations.  The grind higher certainly seems to have taken hold this year.  As the week progressed trade became more and more slow.  There was a fast sale early Friday, perhaps a move driven by longs in the profit eagerly looking to cash in and head out of town for the weekend.   That move ended up being a huge opportunity to hop on board a quiet trend day higher.

I highlight this tradable opportunity and many more on the following charts of Nasdaq opening swings, enjoy:

MONDAY:

05192014_os

TUESDAY:

05022014_os

WEDNESDAY:

05023014_os

THURSDAY:

05024014_os

FRIDAY:

05025014_os

 

 

Comments »

Opening Swing: Mornings Only

Thinking a bit further about my strategy, I realized most of my morning trades should be complete by lunchtime. Therefore, this week I only viewed the opening swing and the action that took place into the lunch hour. There was a really clean opportunity to short the opening swing on Thursday which would have been an optimal entry for a very weak session. Check it out.

MONDAY:

05122014_os

TUESDAY:

05132014_os

WEDNESDAY:

05142014_os

THURSDAY:

05152014_os

FRIDAY:

05162014_os

 

Comments »

Tight Auctions Require Tight Trading

As I continue to study the opening swings and the behavior that occurs in-and-around the levels what becomes clear is how important the narrative of the tape is to successfully positioning yourself intraday.  The early action in the market is very telling of how the morning is likely to progress.  Also, how we go into New York lunch hour and how we leave the lunch hour are vital to trading the afternoon well.

The key is objectivity in your analysis and that comes from keeping a clear and calm mind. Shifting my swing portfolio to less hands on positions like ETFs and dividend stocks is also key, because even on a quiet day of chop in the Nasdaq, having a position down 12% is a distraction.

There were some very interesting opening swings and tight congestion points this week.  The daily action makes sense given our intermediate term balance.  Below you will see a picture of the intermediate term balance followed by annotated daily auctions.  Enjoy!

INTERMEDIATE TERM BALANCE:

NQ_IntermediateTerm_05102014

MONDAY:

05052014_os

TUESDAY:

05062014_os

WEDNESDAY:

05072014_os

THURSDAY:

05082014_os

FRIDAY:

05092014_os

 

Comments »