Breakout attempts and opening-range gaps should continue with more price range this earnings season, as dip buyers oppose rip sellers, writes Trevor Smith of Trevor's Trading.
Traders can enjoy opening gaps in many markets this earnings season due to narrow ranges on several time frames that will almost want to extend pricing. Out-of-range, out-of-value gaps offer mean-reversion opportunities and trend-continuation trades. A single company’s earnings can be so off from consensus estimates that an entire index opens with an unusual gap.
One of my favorite day-trade setups is an “opening gap confusion trade”, as I refer to it. Look for this setup when the S&P500 Cash Index (Regular Trading Hours) opens out of the prior day’s range or fair value with the current day’s Daily Pivot back in the middle of the prior day’s range. While this trade can be a trending “runner” in its gapped direction, the directional confusion occurs when the first 5-minute chart candlestick closes in the wrong color for trend continuation and with a directional candle shape to go the other way back toward the daily pivot to reflect a more-accepted fair valuation. Trade targets are the halfway point between entry price and the daily pivot and the pivot itself. October 6, 2021, is a fair-but-imperfect example of this setup that keeps a day trader on the bullish side of the market until the daily pivot is hit near lunch time. During earnings season, my tests on this setup result in win ratios that vary from 75%-85%- no advice rendered/guarantees.
My last article mentioned space weather dates for bearish market sentiment “near October 6-7, and the 12th” that were accurate and predictive. I continue to list the approximate 50% Fibonacci level for crude oil from its $6.50/barrel price to the $86.50 level at an estimated $45 level. In case of a fast pullback/rebound. 8 of 10 projected ranges printed as of September 30, 2021.
Next Two Week’s Predicted Ranges (Written October 13, 2021)
E-mini S&P 500
High Range 4425-4400; Low Range 4313-4269
Neutral range. Space weather/geomagnetic storm/solar winds dates for bearish sentiment may be near October 15, 19, and the 26th. Monthly-turn and calendar date buyers who prefer buy dates near the 19th should have opportunities to buy dips by both time pivots and space weather. Monthly-chart bearish engulf candle should eventually cause another bear move- those traders are already selling all rips. The higher-time frame traders trade such huge lot orders that these are the bears who jump-scare you! Yearly Pivot: 3225.
High Range 62200-58120; Low Range 52515-50510
Bearish ranges; option chain skew is very bullish. See monthly chart.
High Range 1.171-1.165; Low Range 1.157-1.152
Bullish-neutral ranges on moving average supports. 1.169 monthly pivot target on the table.
High Range $1814-$1800; Low Range $1774-1760
Bullish ranges by narrow-range, pivots-based breakout setup, seasonality, technicals.
High Range $84.92-82.43; Low Range $77.95-76.12
Bearish ranges. Range expansion expected. An attempt by the monthly-chart bear candle to reach the yearly pivot: $40.19, as a sudden, sharp news-sparked price thrust down to $54-$46 Fibonacci 50% level that quickly recovers is possible. Negative divergence appearing in charts- prepare for at least a minor pullback!
Prior Predicted Ranges (Written September 30 for September 30-October 15, 2021)
E-mini S&P 500
High Range 4427-4401; Low Range 4300-4269
Bullish-skewed range. Space weather dates for bearish sentiment may be near October 6-7, and the 12th, and an outlier target is 4541, a monthly camarilla pivot. Yearly Pivot: 3225;
High Range 50314-48560; Low Range 43925-42191
Bearish ranges overall after this bounce. See monthly chart.
High Range 1.170-1.167; Low Range 1.159-1.115
Bullish-neutral ranges on moving average supports
High Range $1779-$1767; Low Range $1742-1730
High Range $77.51-76.36; Low Range $73.67-72.75
Wide ranges. Range expansion expected. An attempt by the monthly-chart bear candle to reach the yearly pivot: $40.19, as a sudden, sharp news-sparked price thrust down to $54-$46 Fibonacci 50% level that quickly recovers is possible.
Trevor Smith is a technical market analyst/forecaster who is registered as a Commodity Trading Advisor. You can view Trevor’s Trading here.