Saturday, April 20, 2019

SPY & QQQ Buy and Sell Zone Example

Buy and Sell Zone Explanation Example

Forming a Buy/Sell intraday zone starts with identifying a zone on a larger time frame (30/15 minute time frame) and using the lower 5/1 minute time frame to fine tune the entry. 

One simple to spot Buy/Sell zone on a larger time frame is when a larger empty candle wick stands out and start's a move on the 30 minute chart.

Below is an example of the Russel Futures Chart. Here are two 30 minute buy and sell zones formed off large empty wicks that started a move. After the zone is formed I scale down to the 5 and 1 minute charts to fine tune the entry.

 
Buy/Sell Zone - Setup with Confirmation
  • Anther option to trade zones is with 15 minute candle confirmations off of zones when both the QQQ and SPY agree. 
  • Zones can be used for 3 setups with 15 minute candle confirmation. The zones are first formed on the 30 or 1 hour charts: 1. Pullback to the zone, 2. a break through the zone and go, or 3. a Reverse Side Entry (gap over a zone and reverse side pullback - zone was once resistance and now its support) using a 15 minute candle entry for each setup.
  • First step is to find a buy/sell zone by examining the 1 hour and 30 minute chart's from prior days. The zone will be formed near a intraday move and or break point and that not been retested with a pullback.
  • The bottom of the zone will consist of a rejection area (pin bars or wicks) and or consolidation/base where the move starts. The top of the zone is where the sharp move took place and will be marked with the break of the Open price on the first red candle that started the sharp move up, when going long. 
  • When placing orders in these zones using the 15 minute candle confirmation I want both the SPY and QQQ in agreement and not the other index up against resistance. 
  • Always ask three questions before entering the trade. What is the setup, does the other index agree, is there room to the next zone for a solid exit Below is an example 
  • Index trades can be consistent if you have the patience and always ask the three questions before entering a trade. Take those quick exits when they present themselves. Below are the 3 trades from Friday with the 3 questions asked for each trade.
    1. QQQ: Breakdown through the zone with the trend, SPY agrees no resistance, Room for a 1-1 trade
    2. SPY: Breakdown through the zone with the trend on a nice red to green candle, QQQ agrees no resistance, Room for a 1-1 trade - exited early as QQQ hit its zone before my exit goal
    3. QQQ: Fade Long, SPY agrees no resistance (top of zone breaking through), Room for a 1-1 trade exit at 1R
    4. X: shows a nice candle off a QQQ buy zone but SPY did not agree - no trade 

SPY  Sell Zone Pullback: SPY trend has been bearish, and a strong sell off the prior day setup a nice SELL zone. At the open the SPY gaped up and traded into the sell zone, and proceeded to sell off. enter the low of the 15 minute candle with stop at the high. If the SPY had gapped over this zone,  I may have considered a Reverse Side Entry on a pullback, with a candle confirmation, and a rising 20ema 
 
QQQ Zone Break Through & Go: QQQ is trending up, gaps up and opens in a prior sell zone. QQQ proceeds to trade through the zone - catching shorts and anyone shorting the R1 pivot and looking for new highs. Exit goal is the R2 pivot- stop low of the day/low the 15 minute candle.

Example of Drawling a Zone for a short entry / Sell Zone: Identify the candle where the sell off starts. Next is to identify the green candle prior to the sell off and mark the OPEN on the candle, this marks the bottom of the Zone. Top of the zone is a base of candles that have rejected a price point. Below is an intraday Sell Zone example with a 15 minute chart. Once I find the zone on the 15 minute I fine tune with the 5 and 1 minute chart.


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Disclaimer

I DO NOT MAKE RECOMMENDATIONS TO BUY OR SELL SECURITIES - I JUST POST TRADES I MAKE OR FIT THE RULES OF MY TRADING PLAN ON A DAILY BASIS. DO YOUR OWN DUE DILIGENCE - YOU ARE RESPONSIBLE FOR YOUR TRADES, INVESTMENTS, AND DECISIONS! ALL CHARTS COURTESY OF TRADESTATION, SCHWAb & TD AMERITRADE