After looking over the charts this weekend, we have the potential for a very good trade setup coming on Monday.
The market has continued to stay in the bottom half of the channel creating a single bullish outcome tomorrow: a break away gap (that does not fill).
This is the bullish trade setup:
1. If the market opens above 1106, then go long at the open with a stop at 1102. The price target is 1130, so this is still a very good risk/reward setup. If you have ways to limit your risk or time your entry even better, that will help the trade.
2. If the market opens below 1106, then I would wait for at least a 5 min reversal candle (at least a 1pt move above the last down candle's high). Then I would go long with a stop 1 pt below the entry candle.
3. Any move below 1096 negates the bullish setup.
The bearish scenario, however, can also have a gap up at the open, but it will be an exhaustion gap.
This is the bearish trade setup:
1. If the market opens above 1106, then I would wait for a move to 1102 to enter. If you have ways to time your entry even better, then that should improve your risk mitiagation. The stop should be 1 pt above the high of the day.
2. If the market opens below 1106, then you can either be aggressive and short the open and manage your own stop, or you could wait for the first 5 min reversal bar to the downside. The minimum target is 1070, but my target of course is more like 950, so the risk / reward ratio could be huge depending on how you manage the trade.
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