There were three factors identified pre-session on 31st March, which alerted me to the potential for an opening drive in this session.

(1) A contracting environment

Firstly contracting on the higher timescale, as shown here on the daily chart.

<image: Recognising Opening Drive Potential>

But also contracting on the smaller timescale, as shown here from an individual session perspective. If you thought NR7 was a good sign for potential expansion, how about NR-whole-month. (NR meaning narrowest range, NR7 meaning the narrowest range of the last 7 days)

<image: Recognising Opening Drive Potential>

Contracting environments often lead to expanding environments. So I look at this information as offering potential for a nice trend day on a break of the prior day’s narrow range. And the potential start of a new longer-term trend if that can break the larger triangle structure.

(2) Recent market conditions are really STUCK

I’ll use a 30 minute chart here because I want to show multiple days.

<image: Recognising Opening Drive Potential>

And even more than that…

<image: Recognising Opening Drive Potential>

And even more than that…

<image: Recognising Opening Drive Potential>

This market has been STUCK sideways. Frustration will be building amongst traders. I know, because I’ve felt it and I have no doubt others will have felt it as well.

Pressure is building within the price action.

The longer a market is stuck, the greater potential for a trending move when it eventually breaks.

(3) Pre-session action is compressing against the edges of the stuck range.

Again the 30 minute chart…

<image: Recognising Opening Drive Potential>

Note that none of this guarantees an opening drive. This just alerts me to the potential for a strong move higher.

But I also recognise that we’re approaching the Easter long weekend, so there is potential for range-bound conditions to continue right into the Good Friday holidays.

So I’m opening the session with TWO potential options in mind. (1) If the market can break the overnight high, expect opening drive conditions until proven otherwise. Full engagement. Find a way to get LONG. (2) Otherwise, trade with caution, expecting conditions to remain stuck, narrow-range, sideways choppy crap. Again, until proven otherwise.

The outcome… the market offers a break of overnight high resistance and holds the break. Entry LONG into a BPB Trade in expectation of an opening drive, with Principles One & Two then in play for any subsequent trades until the trend chooses to end.

<image: Recognising Opening Drive Potential>

Three clear signs of “POTENTIAL” for an opening drive.

(1) Volatility contraction across multiple timescales

(2) Recent days stuck sideways

(3) Late pre-session action (a) causing a gap up open and (b) pushing against the recent mutli-day range boundary

Potential… not a guarantee. Keep the other option in mind as well.

But if that breakout occurs and holds, it’s party time. Make sure you’re not late.

Happy trading,

Lance Beggs

 


 

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