run it up run it down

I was watching the DAX all day as I usually do before the opening in the US. It had opened at 6100 and fell to 5800 and was -5% (61*95). This struck me as odd since it was so bullish yesterday on the resignation of Berlusconi but today the markets were afraid (- afraid they ran it up too fast on hot air and then they took some profits today aided by perma bears who spotted a weakness). In reality Italys interest rates continued to climb today so that was the justification.

I waited for an eventual bounce as I felt there is now way they are going to let the market fall 5% and not try to save it at the end of the trading day. The sentiment was bound to spill over and be evident at the US opening. Traders are opportunistic and the news was going to be used to shift markets.

Some traders use candlesticks and the visual clue to what is going on. For me the lows being put in by the dax were a clue that under 5800 was not really happening:

The hourly chart showed tweezer bottom:

Two or more candlesticks with matching bottom. They can be composed of real bodies or shadows. These occur on consecutive or nearby candles. Indicates a bearish trend is ending, and perhaps a reversal is in the works.

(Note: I have an RSI on the chart as an experiment to see what traditional indicators tell you to do and how you are not really at the races by using this sort of thing).

This alone does not make me take a trade as the charts do not tell you where the volume is clustered. For that you need something which shows you a market profile. When the US market opened it hit the overnight low and bounced a bit. ‘Bracketing’ for past days it showed me that 1236.50 was the last time it was at this point during the day session, a clue to get long: Mondays low was near fridays low and hence the bottom of those balances.

There was a delta double bottom during a crazy opening hour. DAX under 5800 again. When it popped I wanted to see it over 5850, a level it had struggled with all day. I took profits the first time it got there. It pulled back and took it out again. I took what I could and got out.

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