A couple of rules in my trading plan that have so far worked pretty well, and will continue to be in my plan –
- An over-sized candle on any time frame (15 minutes or longer), whether positive or negative, has tremendous support or resistance between 50% and 75% of that candle. Direction will usually continue in the direction of the benchmark candle once tested.
- Second, on Fridays, direction is rarely reversed after the morning session.
- Third, in the context of super-trending markets (like last week), be light on risk if playing the counter trend.
Needless to say, last Friday was an event that was both expected and unexpected. This is why we never say “never” and that the market can do anything – especially in markets like we are experiencing today.
As you can see from the 15 minute chart below, the mid-point of the 7:30 candle (benchmark) DID hold for most of the day and drifted to 1,216 (Pivot Point).
A good short was possible from 1,221 or so to that 1,216, but expectations were to test 1,208. But it wasn’t meant to be. Support held and off to the moon it went.
Did I lose on this trade? Yes. But was it a bad trade? No. The plan was executed and I stuck to my rules and my plan.
The last rule is crucial – when playing this counter-trend trade, go light! My losses were minimal and I still had a positive day (gold and silver reaching new highs again).
It’s another lesson but one I wanted to share. Solid plan, solid execution, but wrong direction in a major trending market.
For this week I am still looking for that 1,240 to get hit. Also looking for new highs in gold and silver before they take a breather.
Monday pivots as follows:
- R2 – 1,235.75
- R1 -1,230
- PP – 1,221.50
- S1 – 1,215.50
Trade well and trade the extremes!