Market Sells Overnight as We Look to Gap Lower this Morning

Critical Level to watch this morning is going to be 1048-1052 on the ES. I said it was just a matter of time before we break through the 1060s, it turned out to be just a matter of hours. As I said in the previous post, the low 1050s would be a critical level. When we trade down there this morning, it will be an opportunity to go for a long entry.

How to play it?
At the first sign of a reversal anywhere between 1048 and 1052, you enter long.
You grab a point or two and you sell assuming that the low will be retested. You buy the low again. Often times a lower low will be put in just to get out the weak longs. If you can afford to trade with size. You take off part of your position after the first point or two. You then put position back on as the lows are retested or when a new minor low is put in.
Where to put in your stop?
Well, 1050 is a major level, so odds are, even if it moves against you, you will have the opportunity to get out of the trade later when the market retraces back up to 1050. You can also add contracts to your position at lower key resistance to make up for the heat that you take on your first position. I don't recommend this unless you are a very experienced trader. Practice in the simulator before trading a strategy you are not familiar with. Keep in mind that this 1050 level is dangerous because there is not much support underneath it. You have minor support at 1045 and the next level might not be till 1030. You may only have one chance to get out if it does tick down, and after that there could be a precipitous drop. Like I said, holding a long here is not for the inexperienced trader if it ticks against you.

So watching 1050. I will post if/when I buy the market and will try and update how I manage the trade in the comments.

NOTE: Dangerous trying to catch a falling knife. Be careful, wait for support to confirm before taking a long, sometimes its better to miss the exact bottom in a sinking market...