In the chat room yesterday, at around 2:10 p.m., I advised a ‘mechanical’ short in this vehicle if it rallied several points to the 1750.25 midpoint pivot (red line) shown. The trade worked beautifully and was still in play as of this writing. It was ‘mechanical’ in the sense that a risk:reward ratio of 1:3 was held constant over the life of the trade, from entry to exit. It proceeded from the idea that if a trading vehicle is going to muster one last-gasp rally before heading lower, the most logical place for the rally to end is at a midpoint pivot that has already been violated.
Thus, we determined to get short if the futures pushed back up to 1750.25, which, as you can see, they did. But instead of using ‘camouflage’ to initiate the trade, which can be tricky, we simply shorted at the red line in anticipation of a drop to the D target shown, 1739.25. With 11 points, or $550, of profit potential per contract, we could afford to risk a third of that on our initial stop-loss. We do this routinely, always keeping the 1:3 ratio noted above in mind. In this case, it implied shorting 1750.25 with a ‘mechanical’ stop at 1753.75. This may not be the least risky way to enter a trade, but it is most surely one of the easiest.
What next? The 1739.25 Hidden Pivot target still looks like a winner — good enough for me to suggest reversing the short position and bottom-fishing there with a stop-loss as tight as 2-3 ticks.