The market opened with a big down gap. Gaps usually fill… sometime. All morning long I had this feeling that it really was too late to short but too early to go long. However, over noon the pace of the market shifted on the 5 and 15 min charts and CME (on the list of strong -dollar gainer – stocks this morning) showed this strange phenomenan. I have noticed this before, you see a pattern on a larger timeframe and a little later you see (sometimes exactly) the same pattern on a smaller timeframe.
In this case the smaller pattern was actually part of the bigger pattern. I traded the 5 min chart on this, but this pattern was part of a 30 min pattern. Some people call this a cup and handle. Key is that there are two tests of a horizontal line, but after the second test, price pulls back notably slower than the move into resistance. In this case it bounced of 5 min sma 20 support (you could argue if a sma is actually support, but I’d like to think so) and that was my entry.
By getting in early (before the actual break) the r/rw often doubles or tripples while the odds of a failure hardly increase. Key in this pattern is that momentum of the second correction in the range is slower than the first.
I closed 2/3 at 2R and held on to the rest until 5 min before the close. Around 3R result.
