Large Opening Gap And Overhead Resistance Stops Out mnGapAutotrader today

Although we advocate not second guessing the market when trading the opening gap, as even large gaps can be unexpectedly closed, today did not look promising for two major reasons.

The first reason was the size of the down gap which was around 15 points on the ES. Very determined pre market selling had driven the market down, however as our trade last week showed, big gaps can be filled and fading them can be very profitable.

It wasn’t just the size of the opening gap today that was concerning us today though. It was the amount of overhead resistance created by S1 and S2 pivot points that would serve as strong resistance for an upwards move of the price from the open.

You can see what I mean in the chart of the automated trade on the ES that mnGapAutotrader made today. Inevitably it was stopped out, but it’s inbuilt risk management limited the drawdown.

The key is to look at those S1 and S2 pivot lines. This is quite timely as we have been investigating the impact of pivots on the success of fading the opening gap, and although we have not got enough data yet, we are considering incorporating pivot analysis into a future version of mnGapAutotrader.

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