Wednesday, May 11th, 2022

Wednesday, May 11th, 2022

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Wednesday, May 11th, 2022

Shorting the S&P 500 E-Mini Futures.

Market Structure

The S&P 500 has been in a Bearish Market Structure recently and with lower-lows being created, we had a bearish bias with a hypothesis that price would make another new low.

Liquidity

With each lower-low (specifically on the 1-hour timeframe), protected swing highs weren’t being violated — thus making us to believe the overnight rally was on low volume. And we confirmed that theory with the Volume Profile. Making $3953 our Price Target.

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Supply & Demand Zones

We marked our 1-hour Supply Zone at $4043.50 to go short / buy Puts, with a Break of Structure and Cut Loss above $4065.50.

There was also a 1-hour and 30-minute Demand Zone below between $3978.75-$3968.75. This would also be an ideal to take Partial Profits.

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Once price reached the 1-hour Supply Zone, it took a few hours before our hypothesis was validated and dropped. Price reached the Supply Zone around 2 AM (PST) and the CPI (Consumer Price Index) report was released at 5:30 AM (PST), which is when the ball dropped, hitting our 1-hour Price Target at $3947.25 (unfortunately, this happened before regular market hours, so we shorted with Futures and not with options).

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In Conclusion

The trade worked out beautifully. We identified which direction the market was going with Market Structure, where potential price targets were with Liquidity, validated which side (buyers or sellers) was holding inventory, picked our ideal entry area with Supply & Demand Zones and properly took profits with Risk Management.

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