Strategy Description: Note that compared to the other ADBE trades posted, this is the A+ trade that is easily executable with big size and tight risk.
$95.00 was a really clean seller on the open. After a big opening drive to the downside from $98.00 to a low of $93.11 it is reasonable to expect a sharp snapback. Hence the playbook trade surrounding getting long into the opening downtrend...
However, it is unreasonable to expect the "snapback" to break the downtrend and go straight back to the highs - especially given that the opening move was well over the daily ATR ($3.00ish). In fact a $2 bounce of the lows, given the big gap and thus far clean selling is quite a big bounce, especially given that it pretty much occurred within one wave.
Based on this along it is completely reasonable to start shorting in the $94.80 to $95.50 range (vwap was 95.30ish) with a stop above $95.50, looking to get about 1/2 size and covering most on dips. On this first trade it's pretty important to keep stop relatively wide because although we know $95.00 was strong resistance, we don't know it's going to fail almost exactly there.
When the first rally fails exactly at $95.00 we know that is has been confirmed as resistance. The next pop to the $95.00 zone can be aggressively shorted now with a tight stop above $95.00. Note that you still want to allow for a flush move above $95.00, so have stop at say $95.21, or alternatively have stop at $95.01 but be prepared to re-enter the trade. I prefer the former.
At this stage over $95.00 puts ADBE in play for a move to highs as a reversal trade.
The goal of this trade is to enter as close to $95.00 and take advantage of the incredibly good risk-reward you get by scalping against a level. Shorting full size with 94.94 average, stop-loss, covering half in the 94.50-94.80 then rinse and repeat is the goal of how to trade around the position. This puts you in a position to hold 1/2 for a bigger move, say back to the lows for example. And also puts in the position to add to a winner on confirmation price action. In this case that occurred on the lower highs around 94.50 and put it in play for a fader setup.
Note that the covers in the 94.50-94.80 range are extremely high probability, and that is one of the things that makes this type of trade so good.
Also note that when I traded this originally I was long 1/4 position hoping for the breakout over $95.00, and was feeling quite excited about the possibility of that trade playing out. It took me a while to reverse my thought process.
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