Debrief · 23 June 2022 · Buyers defend the singles twice, then a gap and go

OvernightA very whippy ON session finally led to shorts covering higher. The ON action had initially driven us lower into Wednesday's singles, but buyers defended this area well. The information to take forward from the ON action: buyers did a half-decent job of defending Wednesday's singles.

The openThursday's auction opened at 3783.75, with a gap to the prior settle at 3760.75. Open Auction Inside Range (OAIR). A test of the prior day's VA high at 3791 was quickly rejected, followed by a choppy auction down towards the previous settle at 3760 that failed to make the distance: buyers stepped in to form the IB low at 3765 (the prior day's VA low). The auction then worked higher in typically random fashion until the IB was breached, only for the auction to fail and go and test the other side of the balance. Watch out for this failed auction setup. It's a trade all by itself, especially when trading balance.

The failureThe reaction to the failure was a test of the other side of balance, which stood at the opening IB low and yesterday's settle at 3760. Once these levels were breached we got a further test to... surprise, surprise, the prior day's singles at 3745. Top clue: buyers had defended the singles overnight, and they did it again, coming in higher with more competitive demand!

I mentioned yesterday that we were unlikely to see extended moves given the pace of the auction and the lack of relative volume. The best trades were outside in, and this was an excellent setup!

Into the closeOnce buyers had defended these lows, the auction moved up through the range unabated, briefly holding at the POC before going on to test the prior month's lows at 3808 (a massive reference). The high into the close was set at 3805.75, just 1/4 of a tick above the prior day's high, and we settled at 3799.5.

Day typeNeutral extreme day, consolidation higher day, in balance. The chart marks the prior balance area and the 3-day balance.

Tweet highlightDon't go chasing rainbows, is my opinion. This supports my last tweet.

OvernightAfter the RTH close, ON sellers found stubborn demand (a double bottom) just above yesterday's VPOC, forming a non-excess low at 3781 (to be monitored). This looked like an attempt by ON participants to follow the pattern of the previous two sessions: large liquidation immediately after the RTH close. Well, that's what I read into it.

A squeeze followed, trading straight through yesterday's high and on to test the spike from the 15/5 auction. That's an important area (spike base 3829), and it's also the outer edge of the larger composite profile. The high from that auction, 3843, and the spike base should act as temporary resistance. Sellers will want to defend last week's high. Buyers will want to end the OTFD on the weekly, move on and repair the poor structure left behind by the successive gaps into last week's OPEX. Look at the weekly research for the higher time frame levels.

Gap rules!

MonitoringON high? ON low 3781, ON ledge 3815, the prior month's close and the prior month's low 3805/3808, and the prior week's high 3843. Open out of the daily range, inside weekly balance (high 3843).

Trade plan

1. A) ON inventory long: a readjustment into the open, or on the open, looking to test the prior settle (PCL) and the prior month's low. A weak test, to go long.
2. B) A strong open back, to trade back through yesterday's high and test the ON low at 3781 and yesterday's VPOC at 3775.
3. C) A gap and go impulse from the open, to break above the prior week's high.

Opening bell0830 CT: buyers came through on the open. It wasn't quite an impulse, but it looked like shorts were waiting for the opening pull-back and didn't get it. Once one was stopped through the high they all were, setting off a cascade of stops higher.

The OTFD on the weekly is now over. The gap back into last month's range looks like acceptance, but keep an eye on that reference during the session in case we get a pull-back. 3873 is now the obvious target higher. No shorts!

Today's gap and goA breakout of the 3-day range and last week's high: stops highly probable. There was a chance to enter, but it was risky into data. Keep your eye on delta.