Will This Weeks Rally Succeed Where Last Weeks Failed? Feb 6th Plan
As I discussed yesterday, it is not our job as traders to “understand” or trade every little intraday gyration price makes. Our job is to have an edge, one little repeating component of price that we can wait on and exploit daily. Failed Breaksdown are one of those edges for me, and as readers know, Failed Breakdowns most often occur after deep, dramatic flushes.
The last two weeks started exactly identical in this regard. Last Sunday January 26, we gapped down from 6120 and sold 180 points, putting in a Failed Breakdown last Monday morning of the prior weeks 5997 low in the process. What was I looking for last week therefore? Failed Breakdown to fill the gap. Its why I wrote last Monday at 4pm: “For now though, the bull case is that we got a short squeeze trigger on the Failed Breakdown of 5997 this morning at 8am, which triggered longs. The bull case ES can now begin back-testing with 6068-71 1st up. React there, then onto 6115-20 to fill the gap.” By last Friday we filled the gap, then sold into hard into Friday’s close.
This week was a carbon copy of last. We gapped down from 6060s and sold 132 points down to 5934. What was I looking for last week therefore? Failed Breakdown to fill the gap, again. Right off the open Sunday, we put in a Failed Breakdown of last weeks 5949 low. I wrote Monday at 4pm: “I wrote yesterday at 4pm: “If I had to give a lean it is always to defer to the immediate trend. This means as long as ES can flag out above 6004-08 or 6020 ideally, we can push to fully fill the opening gap to 6066.” Yesterday, we filled that gap and spent all day at 6066, which had become a ceiling.
The question for today was if bulls can continue to run it. My lean was yes, and I wrote at the close yesterday: “Bull case tomorrow: Bulls took control immediately after the open Sunday when we put in a Failed Breakdown of last weeks lows at 6049 and currently have the ball until proven otherwise…..This would just keep ES marching higher to work the higher resistances (6087, 6109, then ultimately 6137-39 which is the magnet now).” We tagged 6087ish by the close in ES.
Every dip continues to be bought in ES, but we ultimately remain stuck in a big range all year between 5950ish and 6130-6150. Can SPX test, then clear that resistance? In today’s newsletter I’ll talk this, I’ll do a deep dive into the Two Failed Breakdowns we’ve had since Sundays open that started this leg. Finally, I’ll discuss the actionable trade plan for tomorrow.