Why couldn’t they go down to fill the gap (so close…)

by birtanpublished on September 9, 2020

Hey traders David Frost my strategic forecast you're here for another episode of common sense market analysis today is Thursday July 16 2020 we're looking at a daily chart of vs py or spider which is the proxy for the S&P 500 what do we have on the docket today a very narrow

Range trading day the high and the low today were virtually in the same spot now I say that tongue-in-cheek but a narrow ranging day is also known as and this is a technical term so therefore you might want to get out a little bit

Of a scratch pad it was a chop shop we'll come back to the daily chart but let's talk Chop Shop for a second you know the routine right of the vertical is today's activity and the market never did a darn thing today they gapped lower

Under normal garden-variety conditions they would have traded lower at minimum of to fill a gap here was the gap they never were able to get there it's a little odd it's a little strange they'll probably do it overnight but there's a

Counter-argument to not filling the gap we'll discuss that in a couple of moments let's talk range for a second so the market goes back and forth all day long it doesn't actually do anything it was

About a dollar 50 range in the S&P 500 or the s py all day long so there was not much to do unless you were able to catch a top or catch a bottom but this and this is what you really need to pay attention to the lesson learned here is

When we see a Chop Shop formation and the market has no conviction one way or the other and it is just a slow grinding Chop Shop going back and forth in a directionless market there's nothing to do it's a chop shop this is where

Traders get chopped up what exactly is chopped up it's they're buying the market and the market goes against them they're selling the market and the market goes against them but all the market is actually doing is going

Back and forth in this Chop Shop formation taking a look at a different here's a 30-minute chart we don't look at this one a lot they're all the same they just look slightly different is the 30-minute chart telling us anything

Different than the ten minute chart was telling us no it's still a bearish flag –is– formation now if in fact let's get rid of the vertical if in fact the market trades up to same routine on the hourly chart by the way but if the

Market trades up to three 21:58 that would be filling the gap up north the gap down south was three eighteen ninety we know about that number because we've been watching that number we knew that number yesterday specifically inside the

Numbers members they're staying away from that gap for some reason look what happened yesterday below yesterday was three nineteen twenty seven the low today is three nineteen oh nine they haven't been able to push down toward

The gap so here's what that saying either it's bullish and they're not gonna fill the gap right now and they're gonna trade away in the northern direction that's option number one option number two is they're just

Screwing with everybody they took all day to put in a long standing bearish formation and they're gonna actually do it either overnight the thieves in the night they'll go lower will wake up to a gap down they'll open underneath the gap

Trading lower who knows exactly what's going to happen but that's a possibility it's option number two what we need to recognize is when we see this kind of stuff they miss a gap by twenty cents that's not normal they had every

Opportunity under the Sun to go fill the gap it was a choice not to fill the gap why did they make that choice that's what we have to figure out that's part of the thing that makes this a mystery novel did they not fill the gap because

They're gonna go right back up or did they not fill the gap cuz they're gonna go a whole lot lower both are on the table there's no way we could say with any kind of certainty one way or the other look at this let me just show it

To you from this perspective here's the gap up north and here's the gap down south they're spot on the middle so we don't know whether they're gonna trade up on Friday or trade lo on Friday we'll have a better

Idea Friday morning and that's really what inside the numbers was made for we see what the markets doing we get the deal of the day and hopefully it's the correct read where when we put on a trade it's a positive winning trade

After all that is the objective back to the daily chart for a moment is there anything that changed on a daily chart is anything different than it was yesterday other than the fact that price finished slightly below where they were

Yesterday the thing is the same there's no change on the chart so we don't need to rehash the daily chart stuff last night we also talked about the weekly chart we don't need to rehash the weekly chart stuff but here's what we'll say

The weekly chart is going to be extremely important what happens if they have an all day jam session on Friday and they trade higher and they close above the high of the weekly breakdown candle guess what that's bullish no

Question about it what happens if they don't do that what happens if they're lower or they just don't close above the high of the breakdown candle well then it's still an active potential bearish pattern being

Underneath the high of the breakdown candle and there's two of them remember there's one here and there's another one here they're almost at the same price the fact that there's two we could say this about it that's a really really

Really important spot let's take a peek at inside the numbers now here's the deal obviously the market was in a Chop Shop formation didn't really go anywhere all day long however we had numbers numbers were important obviously they

Didn't hit the gap 318 90 but we were on that early in the morning technically speaking theoretically speaking under normal garden-variety market conditions they should have filled the gap they didn't fill the gap so

Sometimes we have to pay attention to what the market didn't do and why and try and use that information to our advantage we went over that earlier maybe they're going to leave it a and trade higher maybe they're just

Gonna kill it into Friday we don't know those are the possibilities but when they leave a gap alone like that it's the markets way of trying to indicate something to you it's trying to tell us something it's our job to see if

We could figure out just what that is so here's what I'd like you to do read the notes check out the commentary all day long you'll see that even though we were in a chop shop formation the commentary is beneficial

You still have your resistance numbers you still have your support numbers you know what happens if they're above you know what happens if they're below if for nothing else it's a guideline even when nothing else is happening also we

Know about the pivot so early in the day we're focused on the early pivot 3200 320 and you'll see the market basically traded in and around the big fat round number many many times throughout the day so it was in fact the pivot stocks

On the move we had a bunch of stocks on the move that did trigger today we're gonna take a look at the list when we're finished with the notes you see a sneak peak JD went out a little bit of a ride we'll take a look at that and others in

A couple of moments let me finish scrolling up so you can read the notes pause the video read the notes go back to the charts see what happened today was not yesterday it was not 5 days ago it was today

Today was a chop shop it was what it was we take what mrs. Market gives us we have no choice we take the good we take the bed we take the ugly here's a little imagery just want everybody to get a picture of what I'm looking at while I'm

Looking at it I think it helps clear things up sometimes I could write things I think everybody understands what I'm saying but there's little discrepancy with an image you can see the bearish flag

–is– formation I drew it out it is what it is it just wasn't ready to finish out yet or it's gonna fail meaning the flag portions gonna fail they're gonna run up to fill the gap and if they're doing that there's a high

Likelihood that they're doing a whole lot more on the upside well what happens Friday we'll see what we wake up to moving right along you'll see a lot of the day had a lot of the same commentary in it over and over

And over again why is that because the market didn't do anything look like it was gonna go down went back up looks like it was gonna go up went back down Chop Shop formation just the reiteration using a different chart here was the

Hourly chart bearish pattern it's unmistakable yet it just wasn't ready to complete and we know the other thing let's say it does complete to the downside if it does because we ran sideways over on top of the gap all day

Long what's the likelihood that they stopped at the gap if they're gonna do the gap on Friday morning it's not likely it's actually unlikely at this point what is more likely is that they go lower we'll have that for inside the

Numbers early Friday morning as well obviously so there's the end of the notes let's go to these stocks as you can see it was a pretty healthy list this morning why is that it's earnings season we talked about

This the other day when it's earnings season the trades begin to come fast and furious so earnings season got underway for the most part this week next week there's gonna be a whole lot more opportunity

Than there even was this week so here's the deal today there was a nice little laundry list of stocks on the move eight total opportunities five hit they're numbers we're gonna take a look at the charts in a moment we'll also use those

For some learning opportunities there's always something to take away and learn from every single chart quick note how do you handle when there's a whole long list of stocks on the move on the board you watch the ones that are coming close

To their price targets if something is five six seven percent away at the opening bell we're not worried about it right now if something's 1% if something's half a percent if something was hovering before

The opening bell we are worried about it first one on the board American Airlines a al getting its haircut at the open closing price was thirteen forty-four yesterday so the stocks open lower came right into the number

Relatively quickly 1246 spiked it by a little bit the lowest 12:40 that's no big deal and then it turned around and went back in the other direction so the high here is 12 85 doesn't sound like a lot however what I purport is that even

A word what I propose is traders take around a 1% profit on a portion of the position this way you give yourself an opportunity to take the rocket ride if it's going on one you're participating but you also turn these trades when you

Do that into a risk-free emotionless trade because if the stock turns back down you just get out you get out north of or at break-even and therefore you still guarantee yourself a profit on whatever portion you took off let's say

You bought 2,000 shares of American Airlines at 1246 you took a thousand shares for example off up around 1% in this case maybe it was more maybe it was up 20 cents now the rest of it you let go on the ride now this wasn't a

Tremendous trade this is what we classify as a base hit base hits are good base hits put you in the Hall of Fame you just need a lot of them they add up that's why we come every day in uniform ready to go Delta looks pretty

Much like American again not a tremendous trade what was the high over here 2795 still gave you a base hit there's nothing wrong with base hits you can make a living on base hits take my word for it about United Airlines it was

Airline day this was a good one what's the low of day 34 15 what was the number on the board 34 15 how you doing turns around goes back in the other direction what's the high 35 38 base hit maybe it's a double I think we stretched

This one too a double Royal Caribbean crap sandwich this is basically a scratch it's a no trade trade meaning it was a trade but there was no gain on the trade it wasn't really

Basse it it was either a loss or a scratch but it wasn't a big loss this was just a trade we move on it didn't work this one did about JD calm look at this rocket ride member on the board bright and early 59 58 when this

One popped up on the scanner I was basically licking my chops 59 58 was a spot they're all spots but this one can move and when you get a stock that can move into a pretty good spot and it begins to move it's a recipe for

A rocket ride need i say more went up to 62 and change this is definitely a double triple even classified depending on how anybody might have traded it this could be termed a home run and it's a home run in the category of a day trade

Not a swing trade not something you were holding for a year we're talking about holding it for an hour minutes a few hours that in and of itself is a home run keep in mind we're on the front edge of earning season put your seat belt on

What's going on over in camp IWM well check it out so they're hovering on the 200 period moving average anything change from yesterday the IWM was down a little bit but no no change from yesterday it's basically the beginning

Now we don't know this but they could certainly come down and fill the gap tomorrow but if they don't and they continue eating time off the clock what are they doing they're running sideways building energy to do what to get up to

This breakdown candle high what's the high a buck 50 we talked about a buck 50 last night if they run down if it's a red market on Friday at least in the early going and they run down that takes that off the table it takes the luster

Away from higher prices in the immediate term however this is what we have today we take the market whatever chart we're looking at we take it at face value on that day we don't project we don't say what if we don't anticipate that's a

Dirty word for traders anticipating a move anticipating a move for a trader is a fancy way and a technical way of saying they're taking a guess you can't do that when you guess you're actually gonna be wrong more than 50% of the time

How do I know that because I used to guess you use the guess some of you still do guess you're wrong most of the time I know how it works the reason I can say that is because when we're guessing the reason we're making a guess

Is we got emotionally involved in a stock in a market in a trade in a chart whatever it is we see something taking place and we don't want to miss it we end up with what FOMO fear of missing out when you get FOMO you end up doing

Things you shouldn't do because that little devil on your shoulder is tapping you saying hey come on we're gonna miss the game you gotta hop on board fast so next scene shows we hit a market order we hop

On board we're the last tic they turn around they're going in the other direction before you know it you're down 300 bucks most of the time it only gets worse from there and what we did at the time was we

Justified the trade saying hey it looks like it's gonna do this because of this thing I'm gonna make up in my head and convince my alter ego so we jump in the trade we take a hit we say we'll never do it again and then the next day you do

It again if you follow the rules adhere to the numbers the stuff that's taught in the course at lazy e-mini trader that won't happen here's the way you can get out of

Guessing think of it like this let's say you had to justify why you took a trade to me win lose or draw you had to choose the story the technical reasons behind why you took the trade you have to explain it to me you have to show me the

Chart and I have to agree if you do that getting into every trade if you say how am I gonna explain this one am I going to be able to explain this one or is this really just a guess guess what if you can't explain it it's a guess don't

Do the deal there's my psych lesson 101 for the day anything else to discuss in the IWM absolutely not chop chop for me what about the folks down at the

Transportation department guess what canary in the coalmine hello let me show you the opposite thing we looked at in the SP why can't see it on the daily chart let me bring up some other charts how about a 15-minute chart

What does this look like you have a move higher and then you have basically a bullish wedge ish thing going on what does this tell you this tells you under normal conditions it's gonna have a continuation move in the northern

Direction interesting stuff same thing on a half-hour chart or 30-minute chart you have a breakup candle low they ran a little bit of a test turn around and went back in the other direction what is this telling you is this bearish or

Bullish on its face and we take it at face value it's bullish what about this one look at this hourly candle nice reversal and then all of a sudden you have a bullish flag –is– thing going on inside of the break-up candle guess

What it's telling you the same thing that the 15-minute and the 30-minute we're saying you're getting confirmation across the charts 120 minute you would expect no different same routine canary in the coalmine just as a point of

Interest just to reiterate and this is really for the new folks the traders that have been around a long time already know this stuff the IWM is my favorite market leading indicator whether it's in the northern or southern

Direction and the transports are my second favorite market leading indicator a number one canary in the coalmine I would put the transports on a sticky note the queues bound they in the queues above all the moving averages it's in an

Uptrend but it's working off some of the excess some of the bubblicious stuff that was going on as we got far away from home base what's home base the 20-period moving average they've come back to home base so technically

Speaking you do have a reversal candle that hasn't changed obviously but technically there's nothing wrong with this market if everything sells then everything sells but on its face there's nothing wrong from a technical

Perspective with the Q's nothing wrong from a daily chart perspective what about when we look at some other charts here's another 30-minute chart why am i using 30 minute charts today no reason whatsoever

This isn't bullish this is bearish it's underneath moving averages they can't get up off the mat it's the same routine as the s py but if they come up to fill this gap and jump over these moving averages on this particular chart that's

Bullish behavior they'll try and run up to this double top here on this short-term chart hourly chart same routine you can make a pretty solid case that based on the hourly chart this is nothing other than a Chop Shop formation

A bearish pattern that's just doing this in this channel maybe it goes to the top of the channel maybe it comes back down but until and unless they're above here they have no chance to run up anywhere else other than to stay in the channel

Still putting it in perspective that's an ugly candle this is a 2:40 chart ugly candle big breakdown candle generally speaking we're gonna see a continuation move as a result of this candle when well if you've taken the course at lazy

E-mini trader think in terms of time we know time is more important than price and you can see based on this 240 chart we're basically on time so it'll be interesting to see what happens when we wake up Friday morning if time ran out

Thursday at the end of the day about the financials we know the routine we're above these moving averages it looks similar to the other markets where all of a sudden we're basically in the same spot or a similar spot that we were

Yesterday so they begin to formulate another bullish flag formation it's way too early they can come down and fill this gap and that takes that off the table but that's what it is today again face value on that day no

Projecting no anticipating no guessing no shirt no shoes no dice smashmouth down 1% today but it's the same story as the Q's nothing have changed it's above all the moving averages technically it's just a day that it was down a dollar 69

Or 1% but we can't make anything out of that it doesn't give us conviction one way or the other it doesn't change the trend nothing really happened to 40 chart same thing big breakdown candle this is bearish

This is telling you a lower number is coming where's that lower number well maybe they get two maybe they come up short but it should be somewhere in the vicinity of the 50 period moving average how do we know that because it's market

Symmetry where do you figure that out in the course lazy emini trader we use market symmetry as a guideline we use it with all the other stuff that we know all the other stuff in our tool belt in order to give us a full stack we need a

Full stack when we're taking trades either exits or entries we want as much of a stack as possible what's a stack as many things pivots retracements symmetry break up candle lows break down candle highs we know where their support and

Resistance is normally going to be we use those things to our advantage when we have a bunch of things that line up I like to call it a full stack if I told you how much I appreciate each and every one of you without you these videos are

Not possible true accurate information we're gonna pull the ripcord here today it's everything I really wanted to cover I'm David Frost my strategic forecast thanks for tuning in to another episode of common sense market analysis

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