$ES: Hit the “Risk Level”: Two Scenarios to Watch and Trade

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$ES #ES-mini #trading setup

Here we can see how the “risk level”, a 76.4% ext of the first leg up, works as an important test of bulls’ abilities and rigor:

ES-mini 5 min chart

76.4% extension of the first leg up labelled -a- is where a weak second leg up tops. Please note, that in majority of cases, that fib works as a temporary resistance and produces only a micro pullback.

Normally the second test of that same resistance normally succeeds and rally accelerates.

However, if bulls fail again we will be left with a weak and shallow three wave up bounce, a perfect setup for bears to start another large leg down. For now we can keep the same stop 5,222 for long positions. If that level gets broken that will most likely mean (i) the move up was a correctiv ebounce, and (ii) it topped and (iii) a new leg down started.

In conclusion:

Plan A: Continuation of the move higher: trigger: breakout over 5,342 => long; and

Plan B: Invalidation of the primary scenario A: breakdown under 5,222 => short.

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