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Hey everyone, Josh Martinez here with tradersagency.com and welcome to this week’s idea. Today’s date is May the 17th, 2021. Behind us is the NASDAQ 108 beautiful up channel. The market hit the bottom of the channel and showed some bullish reaction. Now, this channel has been around for quite a while. Here’s May of 2020, and today’s date is May of 2021, so basically a calendar year or 12 months going on 13 months. It has u-turn 1, 2, 3, 4, 5 times successfully, this could just be number six. If this market were to U-turn and rally towards north on the bottom of the level to the top of the level, that’s nearly 4,000 ticks. Now, remember what an E-mini contract, every tick is worth about $5 and 4,000 ticks could be worth 20,000 US dollars. With a Micro every text worth about 50 cents it’s still worth nearly 2000 US dollars with an E-mini it’s worth $20,000, with a Micro it’s worth nearly $2,000. So it’s a lot of opportunity.
So what I want to do is I want to discuss the concept of how do you potentially trade this? Because at the end of the day, the market could still break the channel, it can still fall. Oftentimes you’ll notice that with my channels and what we do here, these support resistance levels they will change, and these are not an exact science and they are not like concrete walls. Sometimes they are, but this is as close as we can possibly get with the current evidence. As more candlesticks go by the clearer the picture is, and then we can adjust our support resistance levels along the way. So the key here is going to be not getting in too early and not buying when you’re not supposed to buy. Now, what does that mean? Well, basically if this market’s going to go up 4,000 ticks. It’s probably going to create a bullish trend. If it’s going to create a bullish trend it’s probably going to make higher highs and higher lows off of the smaller timeframe.
So if we look at a one-hour timeframe, you’re going to notice the downtrend.
The sellers are still in control and this market could and appears to be starting the bullish trend, higher highs, higher lows, higher highs, higher lows, higher highs, higher lows. We’re looking for a low price in the buy zone to kind of put that into perspective. Let me draw it out for you. So this is the market off the daily, and it’s making higher highs and higher lows. Right now we are here. Now notice how off this daily timeframe we have an overall uptrend and the markets making higher highs and higher lows. This is really where we want to focus in on that potential U-turn.
If you go to a one hour timeframe, if this is the daily timeframe, each candlestick represents one day of trading. But if you go to a smaller timeframe, like a one hour, each candlestick is one hour. So you’re going to have 23 times the candlesticks on the one-hour timeframe because it’s a 23 hour day market from Sunday to Friday. What that means is if you look at this section on a one hour, it’s going to be a downtrend. Now this one-hour down trendline is just the daily retracement. Sometimes that can be hard for a new person to fully grasp and fully understand, but just understand that if this is going to U-turn on the way up, this is the daily timeframe it’s going to go up.
This bearish trend off the one hour must end, and the market must enter into the buy zone and start making higher highs and higher lows. As this market begins to extend on the way up it creates the bullish trend off the one hour. So once again, daily timer makes higher highs and higher lows begins to retrace hits the up trendline and begins to rally. That retracement off of the daily is a one hour bearish trend. When it U-turned on the way up, it breaks the one hour down trendline into the buy zone and this is where we want to start looking to buy these lows along the way.
So now to the live market here is the overall bullish trend off of the daily.
We are making higher highs and higher lows, higher highs and higher lows. We hit the up trendline. The market’s starting to U-turn and if the market were to rally up, it’s about 4,000 ticks with a E-mini it’s about $20,000 of opportunity with a Micro is about $2,000 of opportunity. We go to the one hour timeframe and here’s that downtrend line of the market making lower lows, lower highs. But this downward trendline is just the daily retracement, and we just need the market in the buy zone.
If we enter into the buy zone, then there’s a trading opportunity and that’s the idea. If we never enter into the buy zone and the market keeps falling, well there’s no trade and there’s no loss. For me, I like the idea of saying, “Hey, if I’m going to win, it’s because of my entry, but just because I think the market’s going to go up, if it never goes up, even though my analysis says it should go up, but if it never goes up, I don’t want to lose.” The way that you can not have a losing consequence for being wrong in your analysis is waiting for the proper entry in the proper zone. This is Josh Martinez, and we’ll see you next week.
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