Immediately when I began looking at the market, the resistance 1 level of 1.36073 stuck out as the first price level to consider trading. The market seemed to be venturing toward it so I set my alarm a few pips above it and it triggered about ten minutes later. The first touch occurred on the 2:25AM (EST) candle and rejected the level. So far, the price action was in my favor given that it suggested that the level would likely hold for a solid call option set-up.
I did not get into the trade until the 2:45 candle, which is where I entered a call option at the very beginning of the candle. Usually, I take trades at the touch of price levels, but here I wanted to have a better feel for how the market might break. After the initial touch of resistance 1, there was only a three-pip move back up. So although the support level is often enough to get a trade in your favor in this case (i.e., a low-volatility period, previous rejection of the price level in question), I felt compelled to wait to make sure that there wasn’t a break. If it means another bounce and missing out on the trade, then that’s okay. I never like to enter into a trade with which I’m not totally comfortable.
Once the 2:40 candle wicked back to roughly 1.36073 by its close, I decided to get into the call option at the beginning of the 2:45. Just the price action and the price level were the main considerations here, as trend wasn’t a factor at all really, as the market really didn’t have a direction yet. This trade won by about four pips.
The same trade – call option at 1.36073 – came up again not far after the previous trade’s expiry. Trading the same level over again can always be valid if the price action favors a repeat of the same trade. It did touch 1.36073 on the 3:05 candle, but again it was difficult to tell whether this level would hold.
Usually when a price level is touched a couple times with bounces occurring roughly right at the level, it’s likely to be broken in the future. In this case, sellers had the energy to bring it back down to resistance 1, but enough buying was occurring at this level to cause a barrier against falling lower. In essence, it was at that point that supply and demand seemed to balance well in the market – hence why it was a pretty effective support level, at least for now.
So I continued to wait on what the 3:10 candle would bring. It formed into a nice doji, which was exactly what you could ask for if you were contemplating a call option here. Dojis (that is, candles with relatively no body to them) at support and resistance level can suggest potential points of reversal. So I got into a call option at the re-touch of 1.36073 on the 3:15 candle. This trade won by six pips.
This market made a good move up above resistance 1 before falling through the level on a big seventeen-pip range candle on the 4:35. This tends to be pretty typical given a host of economic data is often released at 4:30AM EST. In today’s case, there was a lot of economic data from Great Britain, mostly price index information that the market can be reactive to. Of course, this information would be most relevant to the Great Britain Pound (GBP), but all major currencies are correlated pretty well, so one always needs to be mindful of news releases.
Nothing set up at the pivot level. And nothing set up in between the pivot level-resistance 1 channel, so as the market moved back up, put options at resistance 1 became the main focus.
I had a feeling that a put option at 1.36073 could be a nice trade. There was a bit of a downtrend for the morning by virtue of the fact that resistance 1 had been broken and previous price history had given congestion at that level (where I took the previous two trades).
When price got back up to resistance 1 on the 6:55 candle there was a rejection, so I waited for a re-touch to get in. This came one the 7:10 so I entered into a put option. Unfortunately, this trade was a flop from the very beginning and went against me the entire time before settling for a nine-pip loss.
So my favorite set-up for the day turned out to not work out whatsoever, which was surprising. But you can’t win them all, and I was still very content with a 2/3 ITM day.