Five Easy Tapes: Open-Test Drive
Post NVDA Meme Top?
Each week I review key moments from recent price action in the indices. These instances will be analyzed using three methods: the tape / DOM; footprint; and candle chart. Synthesizing the three allows an understanding greater than the sum of its parts, leading to a complete understanding of the auction process. There are many great resources out there, although I am not aware of any that provide such a comprehensive study guide.
Image 1. It could be worse…
Live Tape
In these examples I will share my screen with the tape and footprint during live trading sessions. Not all of these worked out, the key is to understand what is going on during the session, as well as appreciate when things suddenly change - or your reading was off.
Piece No. 5: a topping Open-Test Drive (into seasonality, finally?). That would be a great way to wrap up this series! For a review of the other four pieces, see the links below:
At the Crowstack, I don’t like to throw out casual predictions - that’s for Cem Karsan and he does a better job being wrong anyway. I do go into detail on thematic cycles (the coming macro piece for Crow Mags, for example), but exact timing is an art.
Regardless, we can trade structure and infer moves as they develop. So, the question is - if I were to trade seasonal weakness into the beginning of September, how would I build a trade of ES shorts to cover my portfolio? Luckily, I did just that!
August 29, Selling the PCE
Pre-market saw PCE - a much anticipated data point this week - come in at expectations. I was expecting a hard sell-off if the number came in hot, and probably weakness if it came in neutral, given the trapped highs from the day before.
Already, I had the PDPOC on watch as an early guide on Friday. We were looking to open below the prior day value, so bulls wanted to see this taken out asap.
Image 2. ES daily profiles
The video is recorded 1x speed. I had the PCE spike as an early reference on my screen. Buyers would need to take this out at the open, but note the lack of committed buyers at the highs of the spike, and in the hour ahead of open. That was an early clue.
Video 1. ES tape / 5m footprint.
THESIS: A failure of buyers to see momentum above the prior day value and PCE spike could attract selling activity.
INITIAL SETUP: Open-test drive reverse and a break of prior day lows, potentially targeting a NPOC below.
KEY OBSERVATIONS and BUILDING A TRADE: