Video Transcript:
Hey guys, Dan here from Funded Trader Academy with my trade of the week. Let’s break down this 20-point bullish trap setup from Tuesday, March 31st during the New York morning session on the S&P 500.
This setup was framed off an opening impulse move, taking out a key level shortly after the open, trapping some retail traders and then reversing. We’re going to look into this setup from start to finish and dial in the specifics using order flow software to qualify this trade. So let’s get into it.
Before we dial in the specifics, let’s provide a bit of broader market context using the Volume Profile and the daily chart here to really get a sense of where the market was. For the prior month and a half or so, we had a massive downtrend. Pretty clear to see this downward channel pushing further and further to the downside.
If you zoom out and look at the Volume Profile on the 30-minute or hourly chart, you can see that coming into Friday, we had a dead cat bounce on Monday. It failed to take out the prior day high and then flushed during the New York session all the way back down, fading the entire move during the overnight session and closing essentially where we opened.
Then during the overnight session, we took out that low, rallied during the Asian session, and pushed price back up again for another retrace down. So we had essentially the same type of setup as we moved into the next trading day.
Heading into the market here, we established where our most recent value was. What are the key levels I want to see break in order to trend higher? And what are the key levels I want to see break down? At those same levels, where do I want to see a failed breakout or breakdown? That was established right here: prior day high and London low. We also had a high volume node in this area. These are the areas that needed to break.
So heading into the day, I had these levels marked on my chart. Before the bell, price was sitting right in the middle of them. What I was looking for was for price to take one of those levels after the open. Either take the prior day high or the London low.
So what happened at the open? Let’s switch to the footprint chart. At 8:30, price surged. We saw strong initiative buying, heavy bullish flow pushing price up aggressively. Perfect. Price came up, took out my level, and started to extend slightly.
But then we began to see signs of failure. Delta started shifting red. More initiative sellers stepped in. We saw traps forming at the top. Even better. But there was no follow-through, no real break in structure.
So what was happening? Price came down but couldn’t break the final bullish push. Instead, it started building structure. Then we had another weak push up, trapping more traders. And then came the rug pull.
This was the structure break. Delta shifted, and price moved lower, taking out 64.82. We pushed up, trapped traders, shifted structure, and then got follow-through to the downside.
There was a sell stop sitting here, so once price broke through, it triggered the move. Price pulled back slightly, tagged me into the trade, and I took this as a reversion to the mean. I exited a couple of points above VWAP once we broke the prior low.
So to recap: we framed the day, identified key levels, mapped out our scenarios, waited for price to reach those levels, and then shifted into execution mode. The level was taken, control shifted, structure broke, and we got confirmation for continuation.
That resulted in about a 20-point move within the first hour of the session.
Hope that was helpful. I’ll see you in the next video.
Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of funded traders every day, click the link below and join us. We’re looking forward to trading with you.
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