We had a trend day today after a balanced profile yesterday.Even though it didn’t start off from the value area and range of yesterday, the O below D seen in the charts above and the single prints at the bottom of the profile were enough indications that longer term interest was moving the markets today as opposed to the rotational behavior we had seen earlier.
I want to spend a bit of time discussing these kind of day’s as we get to see about 1 every month and if we are lucky even two. If it is played out well, it can put generous profits in your account.
The key to such day’s lies in the background. It will always come from a D shaped profile or a neutral day which ends in the center.Once you locate such a set up, odds are high that a trend day is around the corner.
The confirmation however comes early in the first part of the day. You would note that these days will have an open low or an O print below the d letter for trend up days and O above D for trend down days.An open low or open high provides the best set up and Sl can be easily managed below the day’s open and low price or high price if trend down day
The next step is to wait out the IB period. In extreme cases as today, we can have a large IB, but generally such days are marked by a lower IB range. Once the market moves above the IB range, a pure trend day will not get back into IB again.
Such days should never be faded as in fading the max losses occur. A trend day has to played for the trend which may be up or down with longer time frame presence controlling all the activity. Hence a dip buy closer to a reference levels or a -resell if trend down day is the best strategy for this market.
What is also very peculiar to these days, is an afternoon adjustment of inventory which usually happens around 1-1.30 give or take a few.This will mark the biggest pullback of the day and should it hold the day’s vwap or dpoc, it should be the best dip buy location for longs or short sell if trend is down,.
Such days usually close at the extreme end and end up hitting the next High volume node in the fraction of the trend.
For tomorrow’s action and consequent moves, the pull back low at 4738 in NF and 8225 in BN are vital for all longs. In fact they are trailing stops for all swing positions hereon.