ES Trade Plan – 7 April 2014

Review of Friday

Why did we stop at 1860 on Friday? I don’t see a good reason for that particular number. However, the low of 1856 was a point off the gap-up open of 1855 on 3/31. I’d say the chances are very good we close that particular gap tomorrow; that calls for a move down to 1850.50. However, I anticipate a further move to 1838 in the cards for this week. The question becomes, where do I get in for that move?

Thoughts for Monday

Friday’s big range bumped the 5DATR to 20.5, so that puts 1880 and 1840 within range of an “average” day. Monday’s PP is 1869.50, S1 is 1858.25 and R1 is 1883. As I type this on Sunday night, an open below R1 is not out of the question. We almost never close below R1 when we open below R1, so an open that low would mean a green day is likely. Nevertheless…

If I get short at 1860, a move to 1838 would be 22 points. Following my normal 1:3 risk/reward rule, that means I can risk 7.25 points to make 22. The high on 3/31 – the day of the gap up – was 1867.25, so a stop at that point has some credibility.

If I trade two contracts rather than one, I would take half off at the gap fill of 50.50, which would 9.5 points. That would give me a total trade value of 31.5 points, and a risk amount of 10.5 points total, or 5.25 points per contract. That would put the stop at 1865.25. That’s still north of the 3/31 close, so that will also (perhaps) give me some cover on that trade.

I’m comfortable with that.

Trade Plan

My entry for tomorrow is almost anywhere above 1856, the higher the better for a short play. I will get short above 1856 with confirmation from the NQ and in the absence of contradictory indicators from the other indexes.

My targets will be 1850.50 and then 1838.

The time frame for this trade is in the next 72 hours. If we haven’t gotten there by Wednesday morning and I haven’t gotten stopped out, I’ll close the trade anyway, regardless of where we are.

(More thoughts Monday morning, 615am MST)

I see overnight we tagged the 50.50 level. Currently trading back up to Friday’s low at 55.75. That means I will have entries today at 60,55,50 and 38. I will look to the NQ and Transports for directional bias.


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