ES 987T: The "Gap Fill" play is a high percentage play, though entry is sometimes difficult. The best scenario is that the market will trend in one direction over night, then it will be a counter-trend play into the gap fill. The gap fill's target is the previous day's 4:00pm close. In this case, it was Friday's 4:00pm close (8/7) at 1007.25 (big red line on the charts below).
Note: It is recommended to front-run entries and targets by a tick or two to make sure you're filled. It is also critical that certain other rules be followed to make sure that a gap fill is likely and one should even look for an entry in the first place. For starters, making sure the YM is not gapping too much (90-100 is too much) and we are in a high potential gap zone and checking win rate for that gap zone (checking the seasonality win percentages of the trade is a good practice too). Another great resource is the eminiaddict.com rules on "Gap Fade Setups".
Here is today's setup and what points us to a good, long entry to hit the gap fill at 1007.25. The light blue area is the overnight movement.
The second blue arrow is 127.2% of the first blue arrow. Perfect entry at 1000.50.
On a micro level, the right blue arrow is 127.2% of the left blue arrow. Very good entry at 1001. After regular trading began at 9:30am EST, there was a retest of this level and a second opportunity to enter here.
On the previous micro pullback, we see the right blue arrow is 161.8% of the left blue arrow. This level overlaps with the level from the previous chart (off a tick), which makes it a stronger support. This also would've given a good entry at 1001.25. You can see the 127.2% level gave a good pop before and after the optimal entry level.
Next to the 1.272 fibonacci extension, one of my favorite fib levels is the 0.786. After regular trading began at 9:30am EST, there was a micro retracement to the 0.786 level and another opportunity to enter long.
Good hunting traders!
Lesson