We are almost ready to leave the 10 day view, it all depends upon the action Monday. Let's take a look and see what happened and why. First the big chart showing the fib grid, fan, time series, and major resistance going into the breakout. Open the graph in a separate window and read along.
Two sessions ago I suggested that we should all know our levels and treat them as decision points. The key levels going into this 2B setup were at 1007, 1013 and 1018. Why? 1007 was about the top trendline, 1013 was the level of the immediate prior high, and 1018 was the "high candidate" at the start of the downtrend.
Once we broke trend in yesterdays session, I reduced my short position by 25% and took a long in both SPY and DIA. This minimized my exposure to a successful breakout attempt and allowed me to get in early for a possible long play. My focus was now on the 1013 and 1018 levels.
Look at this enlarged view to see how fast this took place.
We gapped right through 1013 in between the two first minute bars and 1014 became support. At this pause, I quickly reviewed the performance of the global indexes and made the decision to reduce my short by another 25%. After a very good fake, the action exploded again with three gaps in as many minutes (at 1018, 1021 and 1023).
Close up of the gaps:
Though I was tempted to take profits on SPY and DIA, I stopped to consider the setup. If this is a true breakout in a 2B reversal, the market will run again. Funny enough, flat line... She sat at 1024 in tight range till the final hour. I studied the RSI indicator and Stochs to try and time the final surge. I decided to put a tight trailing stop on the sale of SPY and DIA at around 3:00PM. I was very forunate, as the run to the high was steady and I was not taken out along the way.
Some of you may ask why I took down the SPY and DIA long position in the end. Let's just say I don't think Faber is so wrong... If this is a true breakout - not a head fake, I'll get confirmation on Monday and join the fun!
One last point - check out how well the fib time sequence aligns with the pops and drops over the last 10 days. Incredible...
2 comments:
Great read Dave.
Next week will be exiting!
Welcome Paulus,
Indeed next week will be exciting. Fortunately, we have the weekend to plot setups and strategies. This breakout occured at a really tough spot for analysis. There is very little recent S&R levels - we are in "no mans" land at this stage and it is very difficult for traders to wrap their heads around a September rally with full confidence. And just a couple of days Cashin implied we were in for something "historic" - makes you wonder.
Regardless, if we don't get an end-around Monday, we have to trade with the prevailing trend - which appears to have shifted upwards again!
Time to make the doughnuts!
Cheers.
Post a Comment