In this strategy trader selects instruments that have dumped on pre-market and at open.
Conditions
It helps if market mood is bearish in general for this to work well. Look for sell-off or profit taking days. We had a lot of these recently due to Trump/Iran fiasco.
- The instrument must fail to beat pre-market high in first hour. So 9:30 to 10:30.
- There needs to be a level to set F.B. trade against (level is probably going to be pre-market, but previous day is ok).
- Set up F.B. bracket, and let it run if it hits.
Levels
Look for levels established by:
- Previous day close (PDC)
- Previous day high/low (PDH/PDL)
- Any confirmed intraday levels that are global. Basically: recently expressed global levels (G).
For example you might see a daily extreme that matches a level established 2-3 days ago. - Previous day post market extremes
- Premarket High, Premarket Low (PMH, PML)
- Again any G levels expressed in pre-market.
- First hour High/Low (FHH, FHL)
In case you're wondering where that 255.80 level came from, its the close of previous day, that is also confirmed by in evening session. The second bounce at 254.35 is also an obvious price to structure F.B trade against.
Same chart below in a different context:
Important:
Clearly, this is a setup that prefers F.B. B is ok if the level is strong enough and you see the reversal happen prematurely (before reaching the resistance level).
There will also be a chart that rubs against entry level without approaching it from below... this is not an ideal chart for this setup and should probably be ignored. See blow.
