Video Transcript:
So, we came into this morning after the accumulation–manipulation–distribution start in yesterday’s Fed meeting. We ended the day right at the beginning of distribution, and distribution began in Asia, expanded in London, and we only really had one decent move in New York. We had this manipulation down, getting SMT with ES, which allowed us to go from this internal one-hour plenty—one-hour gaps—into external and extend the distribution move. It looks like it’s coming to an end now since we’ve got SMT here at the highs. How did that look in real time? This was the move lower here, and this was the SMT. This is the one-minute chart. We did inverse this one minute, but we were coming into this one minute, so the best inverse fair value gap was the three-minute. It was pretty clear. We inversed it strongly. We had a nice pullback. It didn’t get stopped out, but it definitely would have been close, even if you got long at the close. Technically, your stop has to be below this level because this is the body of the third candle, which makes this a little over 1.25:1 risk-to-reward. As we discussed in the meeting, one way to get a slightly better risk-to-reward is to take a bit on the close of the three, but also analyze what you see on the one minute, because sometimes the one minute will show if a pullback is warranted. Initially, we had a BPR here, which called for a pullback, but one thing I did see was this breaker block, which coincided with a fair value gap. ICT calls this the unicorn model. When price comes back into this breaker block, which is a failed order block, it acts as support, which it did here. So, you could have entered at the top on the close, or when price came back to retest the fair value gap or the breaker block. Either way, it was anywhere from 1.25:1 up to around 3.5:1 risk-to-reward if you got in at the top of the breaker block. The five-minute chart created an order block down here that never got retested, and the 15-minute made an order block that we’re just retesting now. Price moved quickly, so this could actually be an area to take action from and a launching spot for price to move higher and take out these highs. You’ve got a fair value gap, an order block, and a change of state of delivery area. The reason I marked that is because on the seven-minute chart, there’s that clear one-candle move, which we can use as an order block. It’s more of a zone. Like I explained in the meeting, it’s not a perfect science with order blocks—that’s why we use them only as confluence. This would have been an area to look for action this afternoon or early morning if price hit it, but it didn’t. As you can see, though, we are getting a decent late-day reaction, so we’ll see if we can build on that.
Another trade I wanted to point out was these two right here. This is a cool trade because, as a pattern trade, it’s exactly what we look for—the inverse fair value gap “B” formation. Where did this come from? Not from anything to the left or all-time highs, but from the break above the initial balance. When we formed the initial balance, we broke above. Sometimes, when we break above the initial balance and then get an inverse, that signals a retracement. So this trade was the break of the initial balance and an inverse, which indicated a pullback. From 786, it was over a 50-point move down. Decent pullback, and then here we had a move into this area, which was an SMT with ES. There was an inverse fair value gap here, and this was another unicorn model: a breaker block failed with a fair value gap overlapping it. Price came back to mitigate that before moving higher. You could have entered either on the close of the inverse fair value gap or on the order block unicorn model, but either way price hit those highs.
Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop firm funded traders every day, click the link below the video and hop aboard. We look forward to trading with you.
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