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Thursday offered a pretty obvious decision to trade, and it turned out to be a good one. Let’s take a look at the Odds Sheet below and I’ll explain why.
Looking at the averages columns you’ll note that nearly everything is showing up in green. This means that most of the index securities we track provided odds that would meet the minimum criteria for a possible long trade. I trade ES, so those are the odds I pay most attention to. But seeing across-the-board confirmation like this always serves to give me greater confidence in a trade. Looking more specifically at ES odds you’ll note that Price Action, Internals, and Seasonality all showed very favorable odds. The up gap percent was above 60% and the profit factor was above 1.4 in every category. The EdgeFinder showed just one study, and it was bullish. So with everything pointing at an upside overnight edge, I went long near the close.
I generally use the stop and target levels published on the Odds Sheet. With seasonality being so strong I elected to use the “X Target” rather than the more conservative standard target. This effectively meant that instead of trying for just 4 points, I would try for as much as 10. I also sent my stop at 8.5 points.
After settling at 1648, ES rose steadily through the night and opened this morning at 1654.75, up 6.75 points. I saw a little slippage in my executions, so I did not do quite that well, but it was still a nice solid overnight trade for me. For those interested in seeing how all my trades have fared since Overnight Edges launched last August, you can check out the new “Trading Results” page under the “About/Contact Info” dropdown. Have a great weekend. I’ll be back next week with some new research.
New to the Odds Sheets? Check out this video for a detailed explanation.
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Last week I showed that new highs on Mondays often lead to a down gap the next day . In fact, Monday is not the only day that suggests a downside edge. While it is perhaps the day that exhibits this tendency the strongest, every other day shows a downside tendency the night after a 50-day high as well. Every day that is…except Thursday . Below are 2 charts. The 1st shows overnight ES performance following a 50-day closing high on any day except Thursday. The 2nd shows looks exclusively at 50-day high closes on Thursdays. Read more.
Wednesday showed moderate evidence all around, and nothing strong enough to compel me to take an overnight position. Below is a look at the Odds Sheet as it looked near the close.
ES and SPY showed moderate downside inclinations but those odds were not confirmed by the other indices. And while the EdgeFinder pointed out a bearish study to consider, the overall evidence just was not strong enough to interest me in a trade. As it turned out ES did gap down on Thursday morning, but only 1.5 points.
I’ll be back later with some research to consider for tonight.
New to the Odds Sheets? Check out this video for a detailed explanation.
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Tuesday provided some interesting odds, and a difficult decision for me. So I want to talk a bit about that decision. First, let’s take a look at the Odds Sheet as it stood near the close.
As you can quickly see since they are highlighted in orange, SPY, DIA & YM all met the minimum short criteria. And ES just missed. Providing further evidence for the bearish case was one EdgeFinder study, and another study that I looked at in detail in the trade discussion room. So there was a fair amount of evidence suggesting a short side edge overnight. Most of the time I don’t take trades if the minimum ES criteria is not met, but between SPY, DIA, & YM odds and the EdgeFinder studies, and the fact that ES odds were pretty close, I nearly convinced myself to take a short. In the end I decided against it though. The NASDAQ 100 and Russell 2000 index securities were not in agreement, showing mildly bullish inclinations. And the other issue I had was that I would be using the smaller target amount in a situation like this. This meant that I would be risking as much as 8 points in order to make a maximum of 3.75 points. I don’t mind doing that when odds are strongly in my favor, but with a borderline setup I don’t like that risk/reward. So I stood aside.
The bearish inclinations did play out Tuesday night and ES opened this morning with a 3 point gap down. Had I taken the trade my target would have been hit while I was sleeping for a 3.75 point gain. So I missed this one. But I can live with that. It’s not the ones I miss that concern me. It’s the success or failure of the ones I take that are important. By not taking these borderline setups I probably miss out on a small amount of profits over time. But I also believe that I am better able to control my drawdowns and maintain my confidence by only trading when the setups are strongly favorable. So I will continue to be selective and patient. And I will also continue to rest easy, knowing the odds are in my favor.
New to the Odds Sheets? Check out this video for a detailed explanation.
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The Odds Sheet has seen moderate odds as of late, and that continued on Monday. Below is how it looked near the close.
While all the indices showed mildly bullish numbers, the Nasdaq 100 stood out as the lone index meeting the minimum criteria for a possible long trade. But the EdgeFinder studies leaned bearish. So with moderate odds, and conflicting evidence it was an easy decision for me to simply sit out. And the overnight did not offer much opportunity anyway as ES gapped up just 1 point this morning.
New to the Odds Sheets? Check out this video for a detailed explanation.
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