We had a lot of spots in our newsletter last night that we liked if they could have waited a few days. We had nothing that was ready. A number of them gapped above and proceeded to sell off for the morning. Reader M.D. wrote to us last night:
“I understand your preference on the market action. On many setups you write ‘needs a day’ or a few. What if the market does not play ball, and the alerts trigger tomorrow? Do you pass on them? Or if not, how would you play?”
We answered back:
“Then we usually look for shorts on breakout failures, shorts on ES, or just sit it out.”
If the market has run a lot for support to resistance, and there are no alerts that are ready, then shorting a gap up is usually a very good risk-reward trade. This is very similar to our strategy of buying the gap down on a market that closes oversold on support. It has a very consistent win rate and something we recommend you add to your tool-box if you are a daytrader.
Big run from support to resistance — silly gap up on an extended market means good risk-reward short.
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