This morning SPY continues the strong sell off till, unsurprisingly, the 200 day EMA around 123.00. Then it proceeded to break the down trend line. I practiced some day trading based on Al Brook’s price action trading.
I ignored L1 because price was too far away from the 20 EMA (white line) and too close to the down trend line back test.
I skipped L2 as by now a bounce was in progress and given the bounce was off from the 200 day EMA, I expected at least a bounce till the 20 EMA on my 5 minute chart.
L3 wasn’t a good short because the signal bar was way too bullish and the potential stop loss was too great.
Finally, L4 had a bearish signal bar so I took it (see first arrow). And a rare event happened, my sell stop on SPY at 123.88 was filled at 123.95! I took half off at the green line prior high support for 14 cents. And the second half got stopped out at break even.
By now a clear up channel had been established. I went ahead and shorted on the channel break (see second arrow). The signal bar was bearish and was off the 20 EMA so it was a good place to short. I took half off at the 50% intraday retracement for 12 cents. For the second half, I had the target set at the magical 76.44% retracement (chart showed the reverse FIB levels) of 123.25. However, after 3 bars of struggle, I ran out of patience and took the profit 5 cent below the first exit for 17 cents. Eventually, price did reach 123.25 exactly before rebounding as shown in chart above.
The above chart was updated as of 1:15 pm. Notice how significant the “projected” parallel channel line worked (dashed aqua line) throughout the day. After breaking the morning low and 200 day EMA of 123.00, SPY cut through the 50 day EMA of 122.50 with ease like butter and finally bounced on the November low horizontal support. I noted the volume surge and thus possible exhaustion, so I started to look for possible bounce. SPY hugged the broken down channel line until it broke through it, triggering an H1. It also looked close enough for a possible retest of the low, so I went long (see white arrow). As this is a counter trend trade, I took proactive exit at the upper channel line at 122.24 for 22 cents.
It wasn’t a bad exercise and I enjoyed it.