What to do when you’re in a pickle.
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Hey everyone, Josh Martinez here with tradersagency.com and welcome to this week’s idea. Today’s date is September the seventh, 2021. Happy Tuesday, everybody. Behind us is the NASDAQ 100 and the market is inside of a pickle. Now, this is a skill that you need to understand, in my opinion, that you should learn how to trade when the market is giving you this kind of condition. If you get it right, there’s about a thousand ticks of upside and with an E-mini contract, it’s about a 5,000 US dollar buying opportunity. But if you get it wrong, there’s a relatively big downside. So let’s see what we can learn and let’s see what we can apply to help us get it right.
Okay. So at the end of the day, when the markets move, the markets traditionally will move in waves. And sometimes what ends up happening is you get these trend lines. And so, the market will start making higher highs, higher lows, higher highs, and higher lows, and you have this outer trend line. But then the market begins to pick up speed and starts making higher highs and higher lows faster. And in this scenario we created what’s called a channel. Essentially, you have where we started out making higher highs and higher lows over here. In this scenario, what we want to do is we want to buy low, profit high, buy low, profit high, but then the market is a little bit more aggressive. Doesn’t really want to have those large retracements, and starts making higher highs and higher lows quicker, creating an up channel.
Basically, what we do is, in this scenario, we buy low, profit high, buy low, profit high. And if the support fails, we know that we have another buying opportunity at a lower price.
But in this scenario, the market broke above it again. And so, now we’re in a pickle. And what I mean by that is this market can do a couple things. Number one is the market just goes up, right? The market just keeps on pushing up. And if so, we can buy it during the extension. And basically you get very, very parabolic markets, very aggressive market. The market just keeps on pushing up.
The other scenario is the market decides to dip down, back into the original channel. If it dips down to the original channel, there’s a buying opportunity back up towards north. So you can buy low, profit high. But if this market breaks this support, it could fall all the way back down, giving us another buying opportunity. So essentially, there is a potential buying opportunity now, a buying opportunity at support, and then a buying opportunity at this support.
So what do we do? Because right now the market is here. What can we do to say, “Well, we’re going up or we’re going down.” Oftentimes what we will do is we will just simply go to a one hour timeframe, a smaller timeframe, and we’ll play the buy zone sell zone game. If the market stays in the buy zone, then we maintain the buying position. We look for counter trendline breaks, candlestick formations, Fibonacci’s, and so on and so forth. Basically applying our favorite interest strategies, destination tunnel trader towards an expected target.
But if the market breaks into the sell zone at this area, it’s a good sign that the market’s going to sell off to the bottom of the channel. And then you play the game again. If it can break back into the buy zone here at support, then you buy it towards resistance. But if it continues to stay in the sell zone, then you expect the market to sell off to here.
Now that’s what we’re dealing with right now. You can see the market created this outer trend line, started making higher highs and higher lows faster, and then broke above it, created that channel, and then broke above the channel. So right now, if we go into a parabolic state and NASDAQ continues to push a bullish, it’s about a thousand ticks to be had, which is a 5,000 US dollar buying opportunity. And what we want to do is go to the one-hour timeframe. And if we stay in the buys zone, because this is a daily timer, every count represents one day of trading, if you go to the one hour timeframe, draw some uptrends. If the market stays in the buy zone, it’s probably going to continue the bullish drift. But if the market breaks into the sell zone of the one hour timeframe, it usually means that support failed and the market’s going to fall to the next area of support.
Now, if that’s the case, I’m not the one to trade against the trend. Overall, the trend is very much bullish. I’m the type of person that will say, “Okay, well, support failed. Let it keep falling. And then we’ll look to buy it here. If that fails, let it fall. We’ll look to buy it here.” I’m not the one to trade against the trend.
And the biggest takeaway from this week’s idea is you make the decision not to trade against the trend. And what I mean by that is if you say, “I’m only going to trade buying in an uptrend, I’m only going to look for low prices to buy in an uptrend.” You’re not going to sell the market first, I think that’s a strong takeaway from this session. All right, so once again, this week’s idea, NASDAQ 100, when an uptrend, the market just broke above resistance, it can act as support. If support holds, go to the one hour timeframe. If we stay in the buy zone in the one hour timeframe, ultimately we can anticipate a thousand ticks of an upward movement. If the one hour time breaks into the sell zone, expect a deeper retracement. This is Josh Martinez, and we’ll see you next week.
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