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This day was packed with setups and fakes, especially after FOMC comes out at 11. Extra volatility, massive swings off of significant levels, and a big fake out off the FOMC initial spike, today gave a ton of experience and opportunities to blow or grow an account.
- Yellow circle: Beginning with a short pullup on the 5m, the MACD looks as though it will make a successful wave, but doesn’t. 1m stops with a bearish 7J non-sig candle and the 5m stops at the 34, and immediately falls downward. We know the day is going to be straight down for the most part, but it is tricky expecting a wave in normal situations during this kind of opening build up. On the other hand, it looks as though it was the first 5m 34 touch, and also a 15m 21 test, so we should stay ready regardless, especially with the 1H being that weak.
- Orange circle: We could take a 1m 34 shortly after the open here, but it is not ideal. Instead, waiting for the orange circle, we get a 5m 21 test with the 1m wave. Note that the 1m wave ends with a bullish spinning top 7J, non-sig and no bearish signals relative to what we normally like. This sends it to a new low, but the 5m immediately bounces up again. Yet another trick, because normally we would assume this move would have continued longer. Instead, the 5m tests the 34 once again, and then it has a prolonged short and eventually gasses out in preparation for FOMC.
- Yellow box: If we want to skip the iffy 1m wave top, we can get the pullup to the 34 shortly after, for an immediate low. However, note again that it quickly pulls back up for a re-test of the same levels on the 1-5m. Then, a bearish harami non-7J comes, and this is a good signal, but optional because of the non 7J and volatile chopping just prior.
- Pink circle: 1m pulls up for another wave, and 5m this times makes it to the 34. This takes it to a new low immediately, but note the 5m MACD is still progressing upward this whole time. We know the 5m wants an up wave, and FOMC is coming, so it’s a good idea to get out on the new low knowing the wave will come soon.
- FOMC: FOMC here is both tricky and very volatile, expensive, and risky. Just before it comes, 5m makes a bearish harami 7J signaling that the upwave has ended, so we can expect a downward push from FOMC. 15m makes a bearish harami 7J on the 34 as well. We KNOW that this means it will go down. However, immediately after opening downward, the 5m reaches the 34, and the 1m has just come to the 34 for its first touch since its previous down wave as well. This sends the market rocketing up toward the valley base set at market open.
- FOMC 2: This is tricky, because the market does not reach the base. Instead, it reaches about 9 points short, and crashes hard, all the way through the day’s lows. This is the correct move, signaled before the release, and the 1m bearish harami spinning top 7J tells us to short at the top of the spike, which I missed. After this, the market drops over 200 points in 15 minutes.
- Note that while the 5m crashed after having its wave fulfilled, the 1H is still supposed to finish upward today. So we get yet another opportunity, after this massive crash, if we are wise enough to recognize that the market cannot finish down here. However, the entry is not so clear. 5m makes a non-sig bullish 7J, and the 1m does make a bullish engulf, but 15m does not give much time to react if we wait for confirmation. Upon stalling at the 1m 34 for a few minutes, 1m explodes back upward, makes a bearish gravestone doji harami 7J, and pulls back to the 34.
- Blue box: This final box sets up the last potential long for us, along the 1m 34and 5m 21/34 as well on the way back up. This final stall takes 20 minutes, but the reward is over 125 points. Upon making another high, we finally break the base of the valley set at 6:30 and the move can be deemed complete. Overall, this back and forth swinging adds up to over 520 points if we do not exit the 1m long from bottom to top, and do not take the short after the valley peak has been reached. If we exit on the 1m gravestone and re-enter on the 34, we could potentially add another 40-50 points. This is the true potential of FOMC.