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After break of the one time framing to the down side. See what level has been tested before going higher?
The swing low profile.
In fact the 30 min POC levels are tested very often in a rotational market.
In a trending market, well, there is no overlapping value even.
Today is a day of heavy loss for me. Heaviest loss that sets back many weeks of good work.
Hence it is crucial to take home the lesson and ingrain that deeply in my memory.
Firstly, let us talk about the day type. The market had a bullish open after a day of balance and after breaking out of a wedge. However, the selling quickly overwhelmed the emotional buying. The market started to tank. Less than 1 hour of trading, market has traded through the prior day's value low. In my definition, it is the start of bearish extension. Not much later, the prior low was taken out. In the daily chart, a bearish engulfing bar is printed. It is not that unusual to have engulfing bars, but engulfing out of the open is quite unusual. In my memory, we had the similar situation on Mar 13th and Feb 27th. In both instances, the engulfing bar has opened up a string of bearish assault.
I think this bar has confirmed that the bears are in control and we are still in a bear market.
Secondly, why I had such a heavy loss. Because I have put down a order in Dow at the prior day's VPOC and the stop orders were smashed through right way. Normally, there will be some initial reaction at prior day's VPOC so that I can get at least a scalp. But not today. Plus I have traded emotionally out of the open based on the bullish bias and other technical levels. Those entries would work in a market like yesterday, but not today. This is telling me that even with market profile, there will be losing trades. Market profile is not a silver bullet, please be vigilant when using it.
But after the initial selling frenzy calmed down, the technical patterns and volume profiles started to work again. I was once again able to trade the reaction from a high volume nodes. It is telling me that my methodology only has an edge in a quiet rotational market. Please don't use this method to trade open hour. My trading rule specifies no trading during the first half an hour. Maybe I should extend that curfew to the first hour based on the market state. Basically, no trading when market is still emotional. Only trade when market forms clear balances and rotational levels.
DAX has retraced a part of the advance last week and filled a TPO hole around 12380. After all the strength formation has been maintained.
Hence my bias is still bullish and I am ready to buy pullback in the form of gap fill or fib retracement.
Yesterday's TPO profile has a poor structure which requires some repair. Hence the most likely scenario is to rotation within yesterday's range to repair charts before shooting higher.
Several key locations on my watch list: VAL = 12423.5 VPOC = 12431
The VPOC is also where the gap is. Hence that is the prime location for me to build my long position.
Once the VAL being successfully tested, it is likely to cycle back to test the VAH which is at 12485.
The scenarios is my mind are:
1. Open test and drive -- test prior day VAL and shoot higher
2. Open test and fail -- test of the VAL failed, and it goes lower to run the prior day's low
3. Open test and rotation -- rotate back and forth between yesterday's value area.
Our scenario 1 is spot on, like Wbemsms has pointed out.
I would like to see the TPO hole in today's profile to be repaired before moving any higher.
Because I don't see the confidence from the market to have a all out bullish trend day before NY open.
I was wrong by assuming the DAX is going to have a inside rotational day.
I have forgotten that DAX is such a stop running instrument that it would run at least one side of the prior day's edge, 80% of the time. Hence the inside value rotation should never be part of the intraday scenario. Once DAX found reaction from one side of the value, always shift my eyes to the other side of the prior day's range high/low.
After Dax ran out of the prior day's high, see where it has turned around?
Last Friday's VPOC.
The market maker has that liquidity pool in mind when he was running the prior day's high deliberately.
After the successful test of the VAL as we have outlined in the prep, DAX has auctioned up one time framing (nearly). But I was looking for a short at the prior day's VAH by assuming today to be a rotational day. This is silly, because DAX is a stop running instrument. One side of the edge are run for more than 80% of time. The prior day's high are run by an upthrust from the market maker. Since DAX is an illiquid instrument, once DAX is on the move due to short squeeze, it is not going to stop at a random location. It always ends in a pocket of deep liquidity pool. In today's case, the Friday's VPOC has finally arrested the short covering orders.
For the whole session, it was doing spike and ranging. There are a couple of good volume nodes can serve as a place to long. Before the volume nodes breaking, I should not even think about short.
