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Market Structure Notes #1

Trading notes from Thursday's NQ RTH session.
Market Structure Notes #1

Today's session was a clinic in why the NQ is so tough to trade compared to other markets.

A few points came up that I think are worth noting. Here's a quick summary:

Really should have included a shot of the daily session. Basically, by putting together such a strong session overnight, the NQ flipped a negative bias to a positive one.

Price moved up strongly to the prior day's high, probed it, failed, but then stuck around in the same zone.

This means we've got a big empty space to potentially fall into if price drops. And, we've got a big open space to move up into if price rises. Basically, expecting a big move on either side of the recent range.

But, since it's the NQ, it's not going to be a random move that suddenly breaks out cleanly. It's got to involve either:

#1) A TON of buildup ahead of the level.

or, preferably

#2) A breakout fail (BOF) at one of the range that springs a big move through the range and out the other end.

One extra note - today was rollover day, which often creates some wackiness right out of the gate.

OK, now the session:

  1. OR chop:
    The first 3 minutes of the session were a nightmare. Fake, Fake, Fake. Even the eventual OR breakout would feel really tough to take a shot at - at least I wouldn't.
  2. Fail without Testing:
    This is an NQ special. Pretty much any other market is going to at least touch a major (MAJOR) level before turning around and heading the other way. The NQ doesn't do that - it'll often turn right ahead of where you're "supposed" to cover or expect a change. This is common and can absolutely chop you up.
  3. Pattern fake:
    Here's a wedge that formed around the low of the session and the low of the premarket mini-range. It's sitting very enticingly above a big empty space that you could imagine price dropping (far) into. But, if it doesn't attack the level...get ready for sentiment to switch. Hard.
  4. Fail without Testing:
    Same as #2. Price drives up towards a very strong magnet....but then turns without testing the level. :/
  5. BOF + Spring:
    This is the big catalyst of the day. It's the one time we have a significant break of the session's range. The NQ rarely makes a giant move without first scooping orders on one side before running through the other.

    Note how this plays into #2 and #4. These moves came without a significant trap or spring outside of the range first. But this move - it's got the spring.
  6. Complex BO
    When price finally pushes up to the premarket high, it's on pretty much a straight ride from the low of the range. Breakouts almost never happen without buildup - and this is just another form of that. Some bulls cover, some bears try getting in early, but ultimately it's not enough to flip the momentum. I used to call this a fail of a fail, still not sure which term I like better.

Are there better trades outside of the range? Maybe. But I'd rather try and make what I can for the first hour or so of the day and move on.

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