Once you see the bell curve forming and you have established the initial range on the minute chart, you fade either end of the range/profile back to the middle. In other words, you trade the range. You can use the value area high and low to initiate long and short trades, as the case may be. Today, the value area (rectangles drawn on the profiles above) was not that wide, but it can be extensive in other sessions.
You can draw a rectangle around the traditional price chart range and trade it from that perspective, perhaps riding from the range top to the bottom. However, top to middle and bottom to the middle is the safest, most conservative trading strategy.
Always pay attention to key turn-times throughout the day, as a rally/decline to break the range could start at such times. Monitor for improving internals to assess the likelihood of a break. Make sure you look at a heat map of the S&P 100 to see if the large-cap leaders can overcome a negative advance/decline line. Also, note the yellow line on the traditional chart above. That is the volume-weighted average price, also a key level to cover trades initiated from either end of the range.
One final way you can trade such days (once the volatility calms down an hour after the open) is to drop down to a 1-min or 2-min chart, then use the Algorithm Trigger for entries and exits, perhaps trading more contracts since the range is limited. Any combination of these methods can filter and take the best trades.
By the way, never underestimate the value of observation. At the end of each day, study a 5-minute chart for the day. Where were the turns? What time? What did the turns look like? What were the internals doing at the time? Before long, you incorporate the information into your brain, and the moves become intuitive.
The range today where 70% of the volume occurred essentially tilted upward from 13700 to 13750. Recall that the market progresses up and down, stalling and fighting at these 50 point increment levels. Always carry that forward. Step back and look at where you are and where the market is trying to go – when the market is encountering support and resistance. The information can be helpful to your confidence.
Perhaps the most important Market Generated Information to add to our bullish narrative today is that the markets held above their gaps, and traders accepted prices there. This helps bury the options market makers before tomorrow’s expiration and could force them to buy more futures as any hope of maintaining price within the Weekly Expected Move range may be dashed.
On the negative side, the volume was light again today, and there are some strange Intermarket relationships I will discuss tomorrow. Also, all the unfilled gaps below us will act as air pockets in an intermediate decline. That is when you need your parachute if you were not lucky enough to timely exit your positions.
Notably, today, gold is in a volatility squeeze, coming off an “h” reversal pattern. I am keeping a close eye on it. A countertrend trade up the channel can be very profitable off a volatility squeeze.