Using Supply and Demand Zones in trading intraday is an important part of an overall strategy in making a determination as to market context and for making lower time frame decisions about how you are trading. Using 60 minute charts with SmartZones, SmartColorBars and a 89 period moving average applied, we can often discern where the market is going. Let's take a couple examples from today's charts in order to illuminate these factors:
In the above chart, we can see the market tagging the higher zone just off the open and finding rejection there and coming back down into the trading range that was defined in the overnight price action. Following this the strong rejection at the zone (greyish blue area), we can see the market began to sell off. At this point, we would suspect the market is going to test into the lower zone and this is exactly what it did, finding support there by days end. This sort of thing is not uncommon. Today one might not have expected such a range expansion. It is also not at all uncommon for the market to have substantial range expansions off the EMA on the chart. The SmartColorBars are also a short tern trend indicator that can help us to identify trending situations. In addition to tagging the upper zone early in the day, the market also tagged the SmartDailyTarget up in that range (a product that is also available through IndicatorSmart that predicts highs and lows with a known probability). The market also retagged this region on the supply and demand SmartZone on the daily chart (image not shown). So, there were about 4 reasons or more for the market to be turning in this region. Following the above occurrences, the market began selling off and providing multiple excellent selling opportunities through the end of the session.
We can also find another pattern worth knowing in the ES for today. The ES has been trading at new highs for 8 sessions or more on the daily chart. When this occurs, the market has to be analyzed differently than it does when in a trading range. Today the ES tagged its lower 60 minute SmartZone from above. The interesting thing about this test is, it is actually pretty rare to see this and the market made a solid upward run off the 89EMA:
All the above tools and techniques are taught in more detail in our ESSP trading system and course. For more details about this system, visit the following page: http://indicatorsmart.com/product/es-smart-patterns-for-bloodhound/
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That's all for now....