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ES Weekly Plan | January 30 - 3 February, 2023
🟩 Daily: OTFU | Ends: 4061.75
🟩 Weekly: OTFU | Ends: 3963.25
🟨 Monthly: BALANCE | 4 Month | H: 4141 L: 3502
Weekly Extreme High: 4195
Weekly Extreme Low: 3975
As usual, a detailed daily plan will be published tomorrow.
On Monday, we saw a trend day to the upside in the form of a double distribution, as there was no interest to fill the poor structure from Friday 1/20 (green candle), resulting in an imbalanced profile to the upside (P-shape). Tuesday’s session was quiet, resulting in an inside day. On Wednesday, we saw a break to the downside of the inside day after heavy selling pressure during the ON session and the early hours of RTH, partially cleaning up the poor structure from Friday 1/20. The fact that the poor structure couldn’t be fully filled was quite bullish as it indicated that we were dealing with a liquidation break rather than stronger selling. Liquidation breaks often strengthens the market by eliminating weak long positions, potential sellers and drawing in stronger buyers at lower prices. Therefore, it wasn't surprising to see buying activity during that drop, and a clean up of Monday's imbalanced profile the following day. The recap of Wednesday's session is provided below, which includes my only trade where I successfully captured a significant portion of the reversal by utilizing the correlation between the levels of ES and VIX. On Friday, the market concluded the full traverse of the prior 4 week balance area, tagging the Weekly Extreme High 4105 in the process, which triggered a closing sell-off (HOD: 4109).
For this week, the main focus will to be on the prior 4 week balance high and the current 4 month balance high 4141. Although the daily and weekly time frames are one time framing up, the monthly time-frame remains in balance. The upper end of a balance area is resistance until proven otherwise. This means that buyers most favorable scenario would be to establish acceptance above 4141. If buyers lack initiative at resistance, responsive sellers will be attracted, and the support area with the high volume node below will act as a downside magnet.
The weekly level of interest is 4070. Holding above 4070 would suggest that Friday’s closing sell-off is insignificant, and target the Monthly Extreme High (January) 4125. Break and hold above 4125 would target the resistance area from 4160 to the Weekly Extreme High 4195, where selling activity can be expected. In the event of further strength, there is an unfilled weekly gap at 4220.75.
Break and hold below 4070 would target the previous week’s VPOC 4032, which is basically the midpoint of the previous week and also the value area high from the week before. Break and hold below 4032 would target the support area from 4010 to the Weekly Extreme Low 3975, where buying activity can be expected. It’s important to take note of the significant references such as MA50/200, the Monthly VWAP, and the high volume node located just below the support area. This area is crucial for buyers to maintain. Conversely, sellers most favorable scenario would be to end the weekly OTFU and establish acceptance below these key references, but they must first end the daily OTFU.
It’s worth mentioning that NQ and RTY have both tagged and exceeded their respective Monthly Extreme Highs (January) of 12020 and 1916 respectively, these are two levels to pay attention to early in the week.
🟩 Upside: 4125 | 4160 | 4195 | 4220 | 4255 | 4300
🟥 Downside: 4032 | 4010 | 3975 | 3915 | 3870 | 3847
Disclaimer: Futures and options trading involves a high level of risk, with the potential for substantial losses. The information provided in this newsletter is for informational purposes only and is not intended to be a trade recommendation. It is the responsibility of the reader to make their own investment decisions and they should seek the advice of a qualified securities professional before making any investments. The owners/authors of this newsletter are not certified as registered financial professionals or investment advisers.
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