Market Analysis for Jan 22nd, 2021

Quick lessons from riding the train (hope the links work) đź‘‡ 

Here’s a quick lesson from Thurs Jan 21 on using relative strength as a clue to buy NQ given the higher lows setup at NQ 13440-13450 for a quick +50-70points ride into EOD.

This allowed traders to make quick profits and then used those profits to finance their ES trade scalp setup (that became a loss overnight)

Then, given our rule based discretionary approach, we re-attempted the ES longs again at a lower average cost. Our official trade bought at 3821.25 with a stoploss of 3798. (2 points below the key 3800 must hold lower end level)

Additional context: gave an early warning last night that there’s potential of getting stopped/whipped off the bull train. Which is completely normal because it needs to refuel/find better support/bids to stabilize the market. 

Comrades had two choices dependent on how they wanted to manage their risk. Either, stopout at 3835 per the trade setup and then setup limit buy orders with stoploss orders underneath 3810-3800 area. Or they had the ability to finance their risk because of the NQ day trade profits and just widen the stoploss in order to withstand the breakdown below ES 3825.

Meaning this premarket/morning provided the same buy setups on ES+NQ vs their respective supports.

  • ES buy at 3810-3820s with a stopout underneath 3800. 
  • NQ buy 13300s-13310s with a stopout underneath 13280 (prior day’s lows)

As of writing, ES is backtesting 3835 and NQ backtesting 13380s (near range high)  to see if this uptrend week could stabilize and wrap up at/near the weekly highs…in order to setup for next week’s assault. See if price action could sustain. ( it’s a bull market/trend until price action does something else, stay objective)

My goal or intent is for traders of all experiences to gather a proper solid foundation in order to succeed in the greatest game on Earth. I’ve been doing this for over a decade or almost half my lifespan. Not many can trade in real-time in multiple asset classes while teaching in real-time and posting memes while being generating excessive alpha over the benchmark S&P 500. 

By leveraging or piggybacking off the bull/bear train momentum, we’re able to capture money left, right and centre from many instruments/asset classes…does not matter what instrument you trade. There will be a mean reversion and drawdown period as always given the statistics of the market. Your system/setups won’t bat 100% so you just need to minimize your losers and be the best at maximizing your winners.

Again, we mainly trade ES on a daily basis for our bread and butter P&L cash flow. This is mostly because of liquidity, sizing, leverage so we can be in and out very quickly in large positions. There’s not many instruments or markets in the world where you can get in and out of large positions without getting utterly blasted on slippage in the long run. E-mini S&P 500 futures provide that niche and I’m very glad that one of my mentors told me to focus on trading futures a few years ago and just nibble on the rest. For those learning futures trading, you should start with the free guide at CME first and get the basics down. https://www.cmegroup.com/education/files/a-traders-guide-to-futures.pdf

Then, fund a $2-3k account and start trading MES to learn. Not to make money quickly, but to learn the solid foundation first on becoming a great trader. Believe me you will thank you 1-3 years later dependent on your personal desire on becoming great. Once you master ES, you can trade virtually any market/stock/asset class using the same approach and then just tweak it a little based on volatility. 

Here our recent threads below for your viewing pleasure…it could be overwhelming so read it a couple times over the weekend when the market is not moving. I’ve made it public links and they should be available for all to see. Let me know if it works as you should be view the charts as well. Chronological order

  1. ES vs NQ relative strength/higher lows setup in place

 https://www.elliottwavetrader.net/p/analysis/202101216684482.html

2. NQ up 50pts quickly from higher lows setup, free ride or breakeven stops necessary https://www.elliottwavetrader.net/p/analysis/202101216684983.html

3. ES keeping scalp position overnight. Comrades can take profits for at least +70 points on NQ or $1400 per contract. At this point, NQ bonus finances the ES overnight risk https://www.elliottwavetrader.net/p/analysis/202101216685344.html

4. Noted beforehand on the potential of shaking out weak hands/do a quick stoprun vs 3835 because of the price action structure https://www.elliottwavetrader.net/p/analysis/202101216686040.html

5. Stopped out yesterday’s long 3851.25 scalp at 3835 during overnight

https://www.elliottwavetrader.net/members/es-tradealerts.php/202101226686580.html

6. Re-bought lower at ES 3821.25 swing trade with stop underneath 3800. 

https://www.elliottwavetrader.net/members/es-tradealerts.php/202101226686820.html

7. Tightened up our stoploss order a few minutes after entry given the quick spike up back into ES 3835. See if momentum sticks around or stopout/need to start the weekend early. For those advanced traders that are trading NQ and ES/SPX/SPY weekly options with me as well. Know your timeframes + risk. Not too much hand holding as you should be in deep profits already so manage accordingly, thanks 

https://www.elliottwavetrader.net/members/es-tradealerts.php/202101226687069.html

Ricky Wen is an analyst at ElliottWaveTrader.net, where he writes a nightly market column and hosts the ES Trade Alerts premium subscription service.