Thursday’s action led to a compelling setup and a sizable overnight win. Let’s take a look at how the Odds Sheet looked and then I’ll discuss how I handled it.
As you can see, 4 of the 8 index securities that we track met the minimum criteria for a long trade. This included ES which is the security I trade, and the one I pay closest attention to. ES showed strong numbers across the board with Seasonality, Internals, and Price Action all pointing bullish. The most compelling odds came from the Price Action numbers, and they are what really got me excited. There were no EdgeFinder studies that triggered on Thursday. While I typically like to see other confirming evidence, the Odds Sheet numbers were strong enough that I was willing to take the trade as long as strongly conflicting EdgeFinder studies did not appear. There was one big concern, though. That was the employment report, which was due out at 8:30 AM on Friday.
The employment report can be a real wild card, and generally creates a substantial increase in overnight volatility. I tend to be extra-selective when considering trades with the employment report due. Often when I take a position during one of these nights I will look to get out ahead of the report. In the trading room yesterday I showed how previous Overnight Edges setups would have performed on employment nights if you 1) ignored the report and managed the trade as usual, 2) exited all positions just before the release of the report, or 3) left stops in place for unprofitable positions leading up to the 8:30 AM release, but took profits on all profitable positions. The first approach is the one that would have made the most money over time, but the third approach showed a much higher when rate, and was the one that was most appealing to me.
So I went long with the intention of exiting my position prior to the report if I had a profit. The Seasonality Up Gap % was greater than 55%. This means I will set my target using the X Target number rather than the standard Target. Below is a picture of my trade.
I got in right near the 4:15 PM close at a price of 1784.25. Using the X Target that would have placed my target at 1794.25. After entering the trade I realized that the price high the previous morning was right at this 1794.25 level. Worried that it could encounter resistance there, I moved my target one point lower and went for 9 points. I was taken out of my trade right around 7 AM with a nice 9 point gain. This turned out to be just 0.25 points above the level of the last trade (1793.00) at 8:30 AM. So I made out fine. Traders that did not use a target, and did not get out ahead of the report, would have been handsomely rewarded in this case, as ES gapped up 17.25 points to open the day on Friday.
Not all trades work out this nicely, but by playing the odds, and waiting for compelling setups, I’ve been able to grow my account over time. This trade was a good one, and it placed the Overnight Edges Tracking Account at a new equity high. Hopefully a lot of other overnight traders were able to make some money on this one as well.
Have a great weekend, and rest easy!
New to the Odds Sheets? Check out this video for a detailed explanation.
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