#ES $ES #trading setup #failed breakout
We have been watching that same wave count and expecting ES-mini to drop back under the key 4,736 support level for weeks:
Today ES finally breached the key support 4,736. I called that level as the key support because it used to be an important top made in July 2023. A previous top once it gets violated turns into a support.
That drop triggers a bearish failed breakout setup trapping all the bulls who chased the rally of the second half of Dec 2023.
On a micro scale we can count that drop as a completed five wave down structure:
The ideal scenario is a bounce back up to 4,760 (the Red Supply Zone).
BONUS: MONTH OPENING RANGE STRATEGY
The trading range of the first three full trading days creates important boundaries we call the Monthly Support and the Monthly resistance:
The Monthly support is 4,727.
Bulls need to reclaim it ASAP to avoid a breakdown scenario.
We have seen a repeating pattern numerous times when a strong rally culminated by the end of a month and then a new month started with a strong 3-day countertrend decline.
If bulls manage to reclaim the monthly support 4,727 we can see a quick rally pushing price back up to the Monthly Resistance 4,828.
This is how that pattern played out in Sep’23:
This is a case study from Aug’23 when bulls failed to reclaim the Monthly Support:
Bulls tried to reclaim the broken Monthly Support four times but every time price dropped back under the green monthly support. The last nail in the buls’ coffin was hit on Aug 14th when a bounce stopped right at the green line. The failure to reclaim the monthly support followed by a strong trending move down.
This is why 4,727 is the key resistance for bulls.
Failure to reclaim that level could trigger a large second leg down.