I absolutely love this market open on Tuesday.

Let’s look at the daily chart as at the close on Monday.

<image: A price shock on the market open>

The Permabears must be feeling pretty good about themselves right now!

Surely this is the big crash they’ve been warning us about for years.

<image: A price shock on the market open>

<image: A price shock on the market open>

<image: A price shock on the market open>

<image: A price shock on the market open>

The daily chart plays a very minor part in my trading. The majority of my higher timeframe structural analysis is carried out on the 30 and 5 minute charts.

But I am always aware of the daily. And commence the day with a short 5-10 second glance at that chart.

We covered this here – How I Use the Daily Chart

From that article…

Daily chart analysis serves two purposes.

(1) It gives me an expectation for the potential daily range, being less than, greater than, or somewhere in the vicinity of the current average daily range.

(2) And it gives me a feel for the bigger picture sentiment. A quick assessment only; no more than a few seconds.

And also (as it’s the part most relevant to today’s article)…

More often than not this gives no significant information. But a few times a month there might be some structure that provides a nice trap or significant breakout which might suggest potential for the market to trend strongly in one direction.

Perhaps I’ll want to prioritise trade opportunity in one direction and limit opportunity in the other?

Perhaps I’ll want to manage one direction with more patience, whereas the other will be exited more aggressively at the first hint of trouble?

And as we’ll see today, perhaps I’ll want to be ready to act quickly on the open if there is potential for an opening trend.

On Tuesday morning, you should have recognised the trap at the open. You should have recognised potential to trend. And you should have been ready to act quickly from the open, if the market did confirm an opening drive in this bullish direction.

The daily chart offers a quick and effective start to your daily analysis, developing contextual awareness and a feel for the potential type of day.

It allows you a head-start in recognising and reacting to the early action on those one or two days a month when the market opens with a real shock to market sentiment.

So let’s develop some skill in quick assessment of the daily chart:

  1. Study market structure (via your Market Structure & Price Action (MSPA) Journal) so that you know the factors which can lead to a potential wide-range trend day.
  2. Commence your pre-session analysis with a quick glance at the daily chart. Are these patterns present? Is there anyone trapped, or any potential for a significant shock to the market sentiment?

Because I promise you, a pattern like the market offered us on Tuesday morning, is a great way to start the day.

The following are prior examples of this same concept seen through YTC social media posts over the years. There could be more, if you want to search. But more importantly… start your own MSPA study and find your own.

Firstly… seen here through the 30m chart. You’ll need to “visualise” how this looks on the daily. 

<image: Price Shock on the Open> 

Another which doesn’t trigger on the open, but alerted us to the fact that “if price can break higher there is potential for favourable follow-through”.

Again, note the variation from the perfect example. But note the important factor – the potential impact this has on the sentiment of other market participants.

<image: Price shock>

Repeating today’s lesson:

  1. Study market structure (via your Market Structure & Price Action (MSPA) Journal) so that you know the factors which can lead to a potential wide-range trend day.
  2. Commence your pre-session analysis with a quick glance at the daily chart. Are these patterns present? Is there anyone trapped, or any potential for a significant shock to the market sentiment?

Happy trading,

Lance Beggs

PS. There are other patterns which also offer a clue to potential wide-range trend days. Like mentioned in this prior post.

<image: volatility contraction leads to volatility expansion>


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