Sorry about this not being as timely as planned, but the chart I started with was too hard to read, and Tim asked if I could use one with better contrast, and I didn't save the draft, so here is a quick redo:
Starting with last Friday's ES chart:
What I try to do, is understand current price action within the context of how other people are trading both in the time frame I trade, and higher time frames as well. Price starts out forming a 1-2-3 reversal (Black numbers). The failure of point 3 (in black) triggers shorts to enter and longs to close see arrow 1 red.
At point 2 (Red) we have a support line from a daily time frame. Note the move below the trendline was reject with as much volume as there was when it broke though. This is a sign price will head higher.
At point 3 (Red) The lows of the doji candlesticks respect the higher time frame trendline on lower volume telling you we are going to blast higher. Also you had additional confirmation when the shorts that came in at the 50% fib retracement had no strength nor follow through.
At Point 1 (Green) we have a pull back on really low volume which means the longs are confident the move will be to the up side. As an ascending wedge forms all pull backs are on wimpy volume so it's a high probability the move will go higher as it does on the break of point 2. If you were to try and scalp a little during the building of the wedge, you would want to hold on to at least a core position as the odds highly favored a break to the high side.
At Point 2(Green) we get the expected break giving the loving squeeze to the shorts.
At Point 3 (Green) you will see price respected the 61.8% retracement from this years high to this years low on a daily time frame. That tells you more upside is on deck.
Lastly with significant divergence on Price at point 4 (Black), we get our signal to go short.
What I hope to have conveyed, is the importance of being aware of chart aspects on higher time frames when trading a close in time frame.
