Did We Take This Too Far? (Trading Reversals)

What a great run higher today!  But wait, did we take this too far?

Yes, all of these markets are bullish, but as the day finished, we’re starting to see signs that we might have taken this a little too far…

Emini ES and Gold look ripe for a short off today’s high, while the Nasdaq still shows signs of strength.

What’s the safest way to short these highs?  Shouldn’t we be buying pullbacks?    And what’s the plan if we go sideways tomorrow?

E-Mini S&P (ES):

E-Mini Keys to Success:

• Strong run higher creates new all-time highs before profit taking drags price lower
• Sellers never really took control of momentum, suggesting buyers will be trying to make another run up to the highs, or we will collapse back down to the range below.
• Bulls want to retest the highs and make new all-time high
• Bears want to go back into the range from Monday.

Best Trades for Tomorrow: 

• [UP] – 123-breakout to buy (or) buyer failure to sell
• [DOWN] – 2-try trap to sell
• [SIDEWAYS] – wait for the range, sell high with buyer failures

E-Mini Nasdaq (NQ):

Nasdaq Keys to Success:

• Strong run higher to take out recent highs and appears to trade sideways.
• “Wait and see” strategy.  Do we pullback?  Go Sideways?  Another leg higher?
• Bulls want to break this resistance for another leg higher
• Bears want to short back into the range below

Best Trades for Tomorrow:

• [UP] – 123-breakout to buy (or) nested failure to sell
• [DOWN] – 2-legged pullback to buy (or) 123-Reversal to sell
• [SIDEWAYS] – buy below the range with seller failure patterns.

Gold Futures (GC):

Gold Keys to Success:

• Bulls run four legs higher and pullback into the closing bell.
• Anytime we see a straight line up like this, following day is usually a range
• Bulls want to get another leg higher to go back to Monday’s trading-range
• Bears want to get short back into the range below.

Best Trades for Tomorrow:

• [UP] – 123-breakout to buy (or) nested failure to sell
• [DOWN] – 123-Reversal to sell (or) nested failure to buy
• [SIDEWAYS] – sit on hands, wait to buy below the range with failures.