First Hour Range
A reader had a question several day’s ago about trading breaks above or below the first hour range. My answer was that if I didn’t already have a trade within the first hour I might not trade at all. Yesterday and today give examples.
Some of the best moves start during the first hour, and I’m always looking for entries. But when I can’t find a setup that I like during this time period, and if the range has been small, I start expecting what happened today — that the first hour range will hold.
Then I confine my search to setups that have two criteria — (1) the setups are very compelling, and (2) if they work they would result in a break outside of this range. It’s surprising how often this will keep me out of positions on a poor trading day.
Yesterday there were no possibilities. Today there was a break through the bottom of the range, but the setup was not strong. For me, both days would allow me to do other research or paperwork.
For those of you that have been following the blog for a while, I’m finally back home (after 2 months.) Everything worked out well, and it’s nice having a multi-monitor setup and time to seriously concentrate on the markets again. Have a great weekend.
On June 15, 2007, was there a head and shoulder pattern on the ES 5min chart? With left shoulder after the second bar then the head at approx 9:45cst then the right shoulder at approx 10:45cst. With the neckline broken at approx 11:25cst. The volume seems to agree with my observation.
Your thought?
j
John,
As far as the peaks and volume pattern you could certainly call that a H&S in the S&P futures. My only concern is the requirement of a substantial rise before the pattern can be called a top.
This gets into a problem with day trading. Do you count a large gap as a “substantial” rise? The previous day was flat, not rising, so the entire up move before this pattern took place outside of market hours.
If I had wanted to trade this pattern as a Head and Shoulders, I would have brought up a 24 hour chart for verification. (I always have one minimized on my screen.) It turns out that almost the entire rise occurred over a period of ten minutes (two 5 minute bars) an hour before the market opened. When you include all of this pre-market data it looks much less like a H&S.
Another tip - look at more than one market. Neither the Russell nor the Dow futures was creating a clear reversal pattern there. At strong turns there will often be a reversal pattern (not necessarily the same kind) in several markets.
So was it a Head and Shoulders? Maybe. If so, it failed to reach it’s target. But even a failed H&S is a warning of weakness. However your question was only about a five minute chart. Each pattern has significance only for it’s own time frame, so Monday the game starts all over again.
Thank you
j