Dax Diary 27th October (1st journal entry)

Yesterday price action shows that sellers was rife at 810 – 820 levels which has stops slightly above. The key range from yesterday was 860 high and the low at 760. Given that price action broke out of the range, the initial bias was bearish but lack confirmation. It was the clear rejection from 810- 820 levels that act as a bearish confirmation which protect the sellers who was above at 860 levels.

Dax started the day with a gap down sell off and it broke out of the range it traded yesterday.

Given the gap down, the first ideal trade is to take a long positions given that this could be a fake breakout and aim to cover the gap which goes as high as 800 – 810 levels. I missed taking this trade which is another potential simply because I was not sure where to place an ideal stop as prices was taken as low as 733.

1st trade of the day was to place sell at 790 levels with stops at 830 and also another short higher at 820 with the same stop. My mistake here is not to wait for a better entry as I could wait and see the reaction at 800 – 820 levels before going short with a better stop.

Price filled the gap and did not break higher as sellers were rife – showing that yesterday sell zone remain intact. However, a break above will have me flip long for a squeeze higher which sits at 860 or new high.

Price was heading lower and my initial target was to raise stop to break even as it approach 760 levels (again this price level was key) and took some off the table, this allow the rest to run on break even. This continue and I have a target of the retest at 733. However, price reacted positively again at 740 where I took another chunk out. With stops at breakeven, the best thing is to let it run and wait for reaction at 50% fib retracement (from the high 810 to low at 740) and price hit that and reverse again. .

This was a strong confirmation to add on short but I failed to do so (see green arrow). Dax headed to my profit taking zone and I got flat at 728 levels. My trade plan was to look for a long around 700 levels and price did not disappoint. After hitting a low of 717 it reacted positively to a high of 757 (with 765 defended). As usual, sellers appear again there – which signal that yesterday support is now resistance. Price action sold off to retest the low at 707 which I missed going long with a tight stops. The second test should offer a decent area to long as it is a retest or to reload and try 765 again (this acted as a magnet).

As price broke above 765 briefly, it was a difficult time to make decision as the initial reaction off 707 was playing out as I have envisaged but it is unwise to chase for higher prices. I also failed to re short with a tight stops of 15 points and it was a quick sell off to a new low of the day breaking below 700. Once again, dip buyers try to shore up prices taking it right back above 700 urgently. Given that 765 is rejected twice and also a new low of the day, the only thing here is to re short dax on any pullback. We did just that at 720 levels for a quick scalp and got out at 705 levels.

Lessons learnt today is to respect and wait for price reaction at important support and resistance that was set yesterday. Understanding their reaction and reacting quickly will help to get better entry and also for better conviction of where price is moving. We have layers of fresh buyers at 685 levels and only a break below will get us excited for lower numbers. The magnet of 765 is still there but we also see 735 as another resistance which act as a potential short area. (again overnight prices before US close hit the high at 735 before falling low as of the time of writing).

Tomorrow trade plan is to wait and look for reaction at 735 and 765 level as potential short opportunities with target at 655 levels. Dax have bands of support all the way down to 585 levels.

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