ES - Volatility Contraction Pattern

Expanding on the Volatility Contraction Pattern trade into XMAS.

1. Strong Underlying Demand

• Elevated Relative Volume compared to prior days’ average
  
• A premarket gap or explosive move off the open
  
• The potential for a breakout on higher time frames
  
• Underlying significant support (20D-50D moving average)
  
• Inability to breakdown
  

2.Recent Overbought / Supply Pressure

• Higher lows
  
• Extreme price contraction on low volume
  

3.Diminishing Suppy Characteristics

• Begin to see the wave tightening
  
• Consolidation into 20D,50D Moving Average
  

4.Decreasing Volatility

5. Explosive Breakout (TBD)

!!!Not Trading Advice. Just a Bag Holder!!!

Comment:

Looking back at the past quad witching. it looks most like June 18th this year.

Comment:

DEC 20. 2019. Gap down in morning. early AM rally.

Comment:

Loaded up. Now we just have to hold the 50D.

Comment:

could still see a flush into the end of the day. Hedging my long position with shorter dated OTM puts.

Comment:

following up on the end of day flush idea. You can see in DEC 2018s correction ended shortly after the quad witching that year. It to had a pump from 10am to 11am then flushed the rest of the day into the following week before the bounce.