YMM1, (3, -1) profitable strategy, faded Stretch
Hi,
First,... the set up: Basis trading the June e-mini $5 Dow futures (YMM1) and applying the (3, -1) formula from the previous settlement:
12434 - 10 = 12424 (first pullback at the open). That's -1 of (3, -1).
12424 back to unchanged. Trading from unchanged.
12434 + 10 + 10 + 10 = 12464, which represents the 3 of the (3, -1) of the first micro intra-day price move. By micro I a implying that prices move in two directions, probably because traders are taking their profits.
(Note: 12469 = 25 April high and 12464 completes the first (3, -1)).
Correlating reason to sell short the June e-mini $5 Dow futures:
12434 + 29 = 12463 = Stretch calculation for 25 April. Here we see two price measurement projections culminating at the same price level, which is indicative of a short sale signal.
12434 + 29 = 12463 = 12434 + (the Stretch calculation, 29) = 12463 for 25 April.
12463 - 29 - 29 - 29 = 12376 (12390 is further beyond the (3, -1) formula than is preferred. HOWEVER:
12463 - 2.618% of the Stretch calculation = 12463 - 75 = 12394.
12390 is the 25 April low.
CME Group estimates the YMM1 volume at 41,009, which is approximately half of a normal trading session.
Note: After printing the low, 12390, June e-mini $5 Dow futures rallied 1to 12435. 12436 = the low, 12390 + (1.618% of the Stretch calculation), i.e., 12390 + 46 = 12436.
Why fade at the first rotation above the previous settlement by the Stretch calculation on the day after Easter? It is the worst post-holiday trading session (S&P down 16 of 20 from 1984 to 2003, but improving recently, up six of the last seven, including a 1.5% gain in 2008; Source: Stock Trader's Almanac 2011, pg 46).
This should serve to explain how the (3, -1) formula has worked from the very first (micro) reversals from the open, basis the (3, -1) formula to the intra-day trading range that defines the trading for 25 April.
First,... the set up: Basis trading the June e-mini $5 Dow futures (YMM1) and applying the (3, -1) formula from the previous settlement:
12434 - 10 = 12424 (first pullback at the open). That's -1 of (3, -1).
12424 back to unchanged. Trading from unchanged.
12434 + 10 + 10 + 10 = 12464, which represents the 3 of the (3, -1) of the first micro intra-day price move. By micro I a implying that prices move in two directions, probably because traders are taking their profits.
(Note: 12469 = 25 April high and 12464 completes the first (3, -1)).
Correlating reason to sell short the June e-mini $5 Dow futures:
12434 + 29 = 12463 = Stretch calculation for 25 April. Here we see two price measurement projections culminating at the same price level, which is indicative of a short sale signal.
12434 + 29 = 12463 = 12434 + (the Stretch calculation, 29) = 12463 for 25 April.
12463 - 29 - 29 - 29 = 12376 (12390 is further beyond the (3, -1) formula than is preferred. HOWEVER:
12463 - 2.618% of the Stretch calculation = 12463 - 75 = 12394.
12390 is the 25 April low.
CME Group estimates the YMM1 volume at 41,009, which is approximately half of a normal trading session.
Note: After printing the low, 12390, June e-mini $5 Dow futures rallied 1to 12435. 12436 = the low, 12390 + (1.618% of the Stretch calculation), i.e., 12390 + 46 = 12436.
Why fade at the first rotation above the previous settlement by the Stretch calculation on the day after Easter? It is the worst post-holiday trading session (S&P down 16 of 20 from 1984 to 2003, but improving recently, up six of the last seven, including a 1.5% gain in 2008; Source: Stock Trader's Almanac 2011, pg 46).
This should serve to explain how the (3, -1) formula has worked from the very first (micro) reversals from the open, basis the (3, -1) formula to the intra-day trading range that defines the trading for 25 April.
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