ES Trade with a Shake-Out!

Published on: October 29, 2013

I got emailed the link to a new YouTube channel last week whilst I was on vacation and I took a look around today.

You can see the channel here – http://www.youtube.com/channel/UCfTf7NJsGKh8U-4svZfz1zA/videos – the videos are well edited with audio and callouts, making them very easy to absorb.

I’d like to take a look at his latest video – “ES Minor Reversal” – because, well – I like to trade minor reversals on the ES as anyone who watches my webinars will know. As usual – for best results use Full HD, Full Screen mode.

I’d like to add my own comments about the video on top of what is already there:

1:00-> The volume profile is showing a very even distribution with a step below @ 54.50 where you have 40k traded and then 20k traded at the next price down. You also have 49k traded at 1755.

At this point (as we can’t see what occurred earlier), we can assume that 54.50 has been defended and that 55.00 with the high volume might also be a line in the sand with 54.50 as the major point of no return. Any lower than 54.50 and you are probably going to see some acceleration to the downside.

As the bid for 2 lots goes in @ 55.25, we have stacked bids which to me would be indicative of a bit of spoofing BUT bids are always stacked at the lows and with the step in the profile @ 54.50, that actually makes that level a low.

So – I’d be wary of those bids but all lows tend to look like this so after a fill, I’d want to see those bids stay firm and them to follow any move up.

1:22-> We get the fill, some of the bids are gone and some size is coming in on the sell side. Still – we are above the step @54.50….

1:33-> Where you see the “I got scared by the big boys selling”. At this point those large orders did push it down to 55.25 and that is still our inside bid. What we’d like to see now is those guys getting caught offside. We have good bids but not stupidly large fake bids, so it doesn’t look like a flip being set up. The sizeable bids are at 54.50 and 54.75.

2:00-> We come down to 54.75 and just 56 trade this time. Then we tick up off the back of 3 large trades. At that point, those shorts at 55.50, 55.25 and 55.00 are in trouble. Buyers were there at 54.75 more or less at a point of resistance (on the volume profile).

As we move up, we can see that decent bids follow price up and large trades hit.

Nice reversal, shame about getting shaken out.

This trader isn’t using the volume profile but is using another method where his trendline should have been @ that level if he’d been drawing it correctly. So there’s evidently a bit of low confidence in the trade location. I’d say with a bit more confidence that there is a ‘backstop’/’level to lean on’ – he wouldn’t have felt so nervous about the location. It wasn’t a huge move against him after all.

The selling we saw had little impact and there was no follow through below. So – always think about the order flow AND the resulting action. If selling doesn’t cause price to move down – you have trapped sellers.

An excellent set of videos TS! I hope it inspires others to record their trades so that they can review them and use that as a platform for improvement.