In this blog I will explain my thought process and reasoning why today I scalped Home Depot for a home run.
New All Time Highs
Home Depot ($HD) recently made a new all time new high this week, Monday, March 4 at $136.23. You may know a similar saying, “new highs are likely proceeded by new all time highs”. That’s more of a side-note than the basis for my trade. What was compelling was that it pulled back over the last couple days with the market. The current profile showed more bullish strength and it was a good opportunity to get in on the action!
Stock Market Bounce
The market recently pulled back two days in a row. I was looking to see if the $SPY $204 level would hold. Given my skeptical view on this rally, and as depressingly resilient this market has been for bearish trades, there is a lot of volume distribution at $204. A solid break below $204 would signal a liquidation break and a more bearish stance however the pivot point held at $204. At a pivot point you see that the greatest amount of trades happened in this range. I use the Volume by Price indicator to show me where this range is. The key importance here is that these places in the market profile are where traders have to make decisions whether to sell or to buy. These ranges in the market profile are back-stories for us to see on the chart and show multiple dimensions; time, volume and price. When these three things line up in the market profile it can be a good place to enter a short-term trade. Volume and price showed recent accumulation around $204 (For Home Depot there was good accumulation between $133-$134). When the price didn’t break below these levels in the first 5 minutes of the day traders quickly had to decide to buy or sell. It was game on for the traders and the long side scalp paid off.
SPY Chart Below:
Another intermediate indicator I used was the 15 minute 100 exponential moving average. This is the green line on chart below and shows that every dip below has been bought up.
The scalp this morning turned into a pretty decent gain as momentum was strong and the market rallied.
Full results below:
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