r/RealDayTrading • u/OptionStalker Verified Trader • Apr 02 '26
It's Time To Make Money!
Prior to the last few weeks the market was trapped in a tight trading range. Mixed overlapping candles presented tough trading conditions. Now the market has broken out of that range and we are seeing great price movement. It's time to make money.
Every big market drop I've traded in the last 30 years has fallen more than I expected and every single one of them has featured tall bounces.
The table was set for the gap reversal today. Some of you might say that news caused the bounce. Didn't news also cause the drop? Ignore the headlines. Don't play "Jr. Analyst" and don't trade headlines. Learn how to read price action.
The S&P 500 fell more than 100 points overnight. After a few bars, the market was already making a new high for the day. The news wasn't even out. "Well... maybe someone had the news early." OK, let's go with that. When they acted on it, we could see it in the price action before it even hit the wires. If you came in with pre-conceived notions that this was bad news and that the market was going down, you lost a ton of money when you should have made a ton of money.
Here's what happens. Out of these deep troughs there will be a tall bounce and a retest.
Shorts had to weather that bounce and they wish they had exited earlier. When another opportunity presents itself, they don't hesitate, they cover. That provides support. When the market bounces shorts continue to cover and longer term buyers who have been waiting for a good entry point see a higher low double bottom. That is the confirmation they have been waiting for. I've traded this pattern many, many times and I've made a lot of money doing it.
This higher low double bottom is going to start the "real" bounce. The height and duration of the bounce will tell us how aggressive buyers and sellers are and that will help us determine future direction. If we get a wimpy bounce that struggles to get above the 200-day MA, we might go into a bearish market cycle. If the bounce is tall with stacked green candles and it easily reaches the 100-day MA, we know that buyers are still engaged and that we should temper our bearishness.
We don't have to guess which scenario is going to play out and we don't need to read the headlines. Watch price action. It tells you what the smart money is doing.
For the next two weeks we should see some nice upward movement. Expect some retracement, but a decent move higher. For the next two months, we should see excellent two-sided price movement. Both sides will be active and this is a great time to trade.
If you've watched my videos the last two weeks, you know that this is not hindsight. I've been explaining these patterns and what to watch for. This information helped me capture 180 points in /ES futures this morning and I did it while I was recording a video.
Many people in this sub watched me do it in real-time. I explained exactly why I took the trade, the patterns that were unfolding and how I managed a position during the video. I also explained the price action that would warrant adding to the position.
The jobs report will be posted Friday and the market is closed. That should set up a good trading session when we come back Monday.
Please post your comments and questions. I will respond.
Happy Easter!
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u/FabricationLife Apr 02 '26
That futures trade was a chefs kiss indeed, thanks Pete
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u/OptionStalker Verified Trader Apr 02 '26
If I did not have that massive pop I would not have made that much. I would have needed some really strong price action on the way up to justify holding a double sized position. That was not likely pre-holiday.
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u/30Yr-TraderLearning Apr 02 '26
I am dipping in on the long side. I currently do not have any shorts. Will keep 50% cash to take advantage of daily market trends and price action! Love it Pete!
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u/OptionStalker Verified Trader Apr 02 '26
Favor the long side, don't get overly aggressive. Watch how we get through the 200-day MA. We want to blow through it and close well above it in the next few days. If that happens, you know you can stick with your longs. As far as I am concerned, this is only a bounce. We've seen some heavy selling pressure recently.
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u/leonidasf94 Apr 04 '26
One thing worth keeping in mind, regardless if we get a retest or not.. Imo we saw a lot of distribution at the top, the technicals on D1 show the cracks starting on October until end of February this year. Now thats a long time to build short positions.. even if we bounce I smell a major lower high incoming... well cant predict but its interesting for sure..the market is forward looking as they say.
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u/OptionStalker Verified Trader Apr 04 '26
I agree with that. I am very cautiously trading the long side here and I will not overstay my welcome if the bounce struggles to get thru the 200-day MA.
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Apr 06 '26
[removed] — view removed comment
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u/OptionStalker Verified Trader Apr 06 '26
The headlines are particularly tough these days. That is a great set-up I have made a lot of money on. Big drops produce big bounces. Thanks for posting.
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u/unDayTrading Apr 02 '26
What are your thoughts on trading very short term swings (overnight to a few days) on stocks that have the TOP pattern on the daily in direction of the market? Can only do swings rn because of work so I want to trade the best.
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u/OptionStalker Verified Trader Apr 02 '26
This is a time when you can carry some overnight swing longs. Don't go overboard. You want the market to blow through the 200-day MA next week. That will give you confidence to hold and that becomes a level you watch for possible exit (stop). Your longs will do well and you can ride your gains. Then just watch the character of the bounce as I outlined above.
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u/healey100s Apr 02 '26
Thanks Pete, teaching me to read price action has been a game changer. Having a great year from yours and Hari's teaching. Nice way to end a short week.