Mastering D-Shape Profiles: Live Breakdown of a Range-Bound Trading Day

A D-shaped profile implies just a chopping day. I’m not saying you can’t scalp—you can—but there’s a lot of rejection up in here. There’s a passive trend stream on the 30-minute, there’s a passive trend stream on the 1-hour, and there is notable PC right here from the week and yesterday that you’re going to run into up through here. It’s going to be a higher-risk scalp if you want to do it. So this is nothing more than just a market structure-type of a break. The problem that I have with it is, yes, you are in this D-shaped profile. You’ve got the PC from yesterday, you’ve got the PC from the week right here, and you’ve got the passive trend stream on the 30 and the 1-hour. That’s the reason that I have my bullish break. If this thing breaks and rips all the way through it, I’ll miss this entire range, and that’s totally fine with me. That’s not my preferred trade.

And I’ll miss that pretty much nine times out of ten, and that’s totally fine with me. I’m looking for something else. What I would look for is price to, one, break out of here. That would show me that we have a false breakdown here in the cash session. Right now, we’re going right into this passive trend stream here, and we’ve got PC next. If we break, if price comes through here and builds a bull flag right up in here, I’d look for that break to the upside. But so far, all we have is a balanced day. Even though this is a very highly bullish run here in context, we’re not really choosing a direction on the day other than sideways so far. If we start to break above here, you’ll have my attention. Start to break above here, you’re really going to have my attention—5923. This is your first indication that a trend is changing. This is your next level of resistance. So as you zoom out from the smaller time frame into the larger, that next level is in there.

And so in here, there isn’t enough margin to make a trade. Once price breaks above here and potentially builds this little bull flag right through here, I don’t have much in my way in terms of resistance. Right through here, it’s a pretty wide open field. If I get that bullish break—same thing down here—it’s pretty wide open through here. This is a lot of congestion. If you look here, right through the value area of the week, once you break above this little node right here, this little high-volume node to the upside, it’s pretty smooth sailing up in here. There’s not a whole lot of resistance, which is why, again, in the mornings, this is what I’m doing: I’m assessing where value is currently. And right now, it’s pretty unmistakable—value is right here, and we’re just chopping within that value.

There are probably some setups out there where you can take these false breakdowns as flushes—like this one here, a false breakdown here, a false breakdown there—but you want to be on the side of the trend. And so far, there really isn’t a trend other than the most immediate one, which is a downtrend to sideways. We haven’t broken that sideways yet. We’ve dipped below it a little bit, only to be brought right back to the mean. So when that shifts or changes—yeah, I mean, we’re just swapping 30-minute candles back and forth essentially: down, up, down, up. I don’t want to be in that.

So the question of the day is: are we going to come down here and fill this new week opening gap—this gap up from the week open? That was my preferred play, but it has not materialized. Secondary play is: are we going to break out of the weekly value area and start to retrace some of this rejection up here and make another run at 6000? Those are the two options. And the third option is: we do nothing and just do this all day.

These are fairly difficult to assess, especially if this doji candle here is in the middle. All that really means is the market has no idea what it wants to do. And when you’re coming off a day where the market does not know what it wants to do—it opens right where it closes—you want to exercise a little bit of caution going into that next day and really force the market to show you its hand. If that means that I miss this value breakdown from here to here, that’s fine. If that means I miss this value breakout from here to here, that’s fine. There’s likely to be another shot later on in the day.

So, especially when you see these doji days—now it is slightly bearish. That was the basis for my view. When I say bearish, I mean the ENQ was a little bit more pronounced on the bearish side, and there was more rejection of higher prices than of lower prices. So you kind of have that slightly bearish, almost a shooter candle. I mean, obviously not exactly, but the NQ was a little more pronounced on the bearish side. And if the ENQ was indeed going to lead the day down, I was looking at that to see if it would develop on the NQ. It didn’t, and so far, nothing has developed.

If this does indeed materialize into a balanced profile for the morning session, you guys remember what my rules are on that. I would be looking for something like—just grab this whole one here. Here’s my range high, and here would be my range low. Could possibly even go all the way back—it’s about the same. Could possibly even extend that out a little bit, maybe even up to here. So then what you would look for in that PM session: you’d look for price—let’s say we just bounce back and forth between here, right? So what you would look for in that PM session is for this D-shaped profile to hold. So when price gets up here, you’re going to look for those reversal signals. And if there’s weakness in buyers and strength in sellers up here, you can go ahead and take that—sell the highs. Same thing down here: strength of buyers, weakness of sellers—you can buy the lows.

Now, in this instance, I would prefer to sell the highs because you have this trend and this sideways chop action holding you—at least giving you the “trend is your friend” type of inertia to the downside. Down here, it’s a little bit more risky to buy because you do have that PM breakout that can take place. That’s the way I would look at this going into the PM session.

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