From the short term trading perspective, buying the pullback in a strong market is the more effective behavior compared to buying into highs. The tough part is when do you buy into the pullback? And how do you know it won't pull back further? This is where the projected levels come into play.
Projected levels on larger time frames carry more weight and are more reliable than the levels measured on smaller time frames. That is why I am watching the 258 support (.382 of structure measured from 84 low). If I am going to buy for a swing trade, I prefer to start looking for reversals that I can measure risk from (like a on a smaller time frame) in this area because a retest and reversal still keeps the broader trend intact while offering attractive reward potential based on the information available at the moment.
It is not unreasonable to expect a retest of the 370 high if the market can stabilize within a higher low area. The key to trading this effectively is waiting for the retest and confirmation which the market may NOT offer at all. You may wonder, "Then why wait for 260? Just buy it once it starts going up from any support and as long as the reward potential is greater than your risk, its okay? Otherwise you miss all the huge gains!". Adjusting to a level that the market decides to stabilize around other than the projected support is fine, BUT you need to realize when the noise comes back into these markets, you will be giving back the the "GAINS!" that you acquired by getting sucked in to many false starts. This is about forming habits that lead to consistency, not "you only made 100% when you could have made 500%!", that same mentality will set you up to donate your account back to the market once this environment returns to reality. A consistent profit is more valuable to me than a big profit.
If this market breaks the 370 high (which is also the upper boundary of the reversal zone), the next push can take this market to the 424 area which is a 1.0 extension projected from the 241 low. These extensions serve as good estimates of short term profit potential and are essential to evaluating if a trade is worth taking when compared to the risk.
In summary, the purpose for developing a plan of action around levels that are relevant to market structure is to simplify your decision making process and filter out all the false starts and forced trades that lead to a large collection of small losses. The smaller the time frame you trade, the more important it is to have such a process. The inexperienced traders are focused on the amount of profit, but do not realize that same mentality is what leads to over trading. Current market conditions reward such a mentality, but what happens when the environment changes? It always changes. Even as these markets work their way higher in the long run, it does not mean it will be a smooth and bump free ride. Develop the habits that will facilitate base hits, not home runs.
Comments and questions welcome.
Nasdaq Interview: So for those that missed it, my interview appeared in the Nasdaq Twitter feed yesterday. You have to scroll back and look for it (around 11 AM EST). https://twitter.com/nasdaq