ES Trade Plan for Monday, Jan 27 2014

Friday finally took us out of the trading range we’d been in for weeks back into a slightly-less explored area. Before I write my ES Trade Plan for tomorrow, I want to review where we’ve been and what we’ve learned.

ES 03-14 (Daily)  11_14_2013 - 1_27_2014

Where We’ve Been

Friday took us out of the range we’ve been trading in literally all year down into the 1780s. We can say for certain that all previous support above us is now violated, but we’ll have to watch to see if it becomes resistance.

I have new support at 1780.25 and nothing significant under that till the high 1760s. I’d prefer a more defined support point below us, but I just don’t see anything. That is both good news and bad news. Good news because I could set a target just using the 5D ATR, bad news because that’s mostly just hoping.

As I look closer, the 1760s are not well-explored. Neither is the 1810-1830 range. Since the 1760s are closer, that’s a higher likelihood.

The range between Friday’s close of 1782 and 1806 was last explored between mid-November and mid-December. The December 18 announcement of a $10B reduction in the monthly Fed bond purchases sent us rocketing out of that range into the 1800s, but perhaps now we are going to explore again.

Daily View

A daily chart shows resistance around 1798, but that could just as easily be Big Round Number resistance. Nevertheless, from support at 1780 to possible resistance at 1798 is a good 18 point range. That’s a little outside of “normal”, but not so far that we couldn’t do it during a normal day.

About “normal” days

As you know if you follow me, I track the 5 Day Average True Range. I believe that tells me what a “normal” range for a “normal” day is. The behavior of the ES is that we have multiple smallish range days where we explore prices between major support and resistance.

Weekly View

A weekly chart is even more revealing. We support under us at 1768.75 which is well within reach, then support under that at about 1754 – again, about a 15 point spread.

I have a regression channel on my weekly chart which has as its anchor points the March 2009 low and the all-time high this month. Last week’s big move down actually brought us back down into that channel after having been extended well above it for the past two months.

Plan for Tomorrow

As always, I will wait for directional confirmation to be sure I am not trading against the trend. I will also check the overnight range to make sure I am not trying to take too much in a direction that has already put in the range.

Entry point tomorrow is 1780.75-1782. Direction will be dictated by the price action. Target 1 will be 10 points. Target 2 will be 1760 if short, 1798 if long. Stop Loss Trigger will be 1/3rd of expected profit. Time frame will the week.

We will also be approaching the 100DMA down below us, so I expect that to provide support, although I put less value in moving average S/R lines than in actual price support locations.

1 thought on “ES Trade Plan for Monday, Jan 27 2014”

Leave a Reply

Your email address will not be published. Required fields are marked *