Exhausted Imbalance

Looking at a narrative trade and what it really takes to survive a rotational based trade.


This trade is based off of an exhausted upleg as well as fading a medium term extreme and a immediate VAH. This was after a decent move up in a trading range and we would be looking for some sort of pullback. The likely narrative destination was reached on the Weekly.


Trades were based off the PVAH reached & fade of the extreme.

The Trade

We can see that this sequence was fading the failed imbalance right at the overnight range high. Thus this trade is fading a macro rhythm extreme and a immediate rotational extreme.

This setup requires a few conditions. Foremost, do not get dragged into the fading 2 game. This has led to many early entries. Far better to wait for the failing imbalance to present itself then fade that failure. We can see this imbalance failing into the pre-market hours when we push of DVAH and fail to break the 1.5 then find sellers.

Given our contextual thesis this would be an aRPB setup allowing us to execute short targeting DVAL.

We can also see on the delta that we had a clean and new rejection off of the 2k delta figure. This would open up room for a -2k delta rotation back down to the 0 line.

All in all this was the setup of the day and really relies on you identifying in real time what IS and being able to execute with conviction on your thesis. Especially given the risk/trade it is still ESSENTIAL that on a rotational trade the stop must remain.