What did happen is an interesting pattern called firt rise - first failure. Like a double top, it does involve two local highs, but the second high fails to reach the level of the first high. A "floor" is left between the two peaks. The benefit of the pattern is that it allows us to create our setups.
From a short standpoint, we are looking for a break below the floor - which is around 1088. A break at the floor usually results in the unwinding of the first peak to it's base. The path to the base runs through several important technical points. I have identified two possible targets for a short setup. Target A is in the range of 084 and 080. This includes a possible re-touch with the 20p MA and a re-touch with the true trend line folloing the rally bottoms. We had a little bump and run action that needs to calm down. Target B includes what I believe to be the base of the first peak and the gap left when this puppy ignited. That is of course in around 072-068.
Though I don't want to think about the possibility, a long setup would include a break of today's high near 095 with a run to of course 1100 - with a real chance at 1120. Remember if the floor is not taken and a retest of the 095 level is made, it is likely going to break out (3rd time a charm). If we break out above our 1100 high, you can expect up to 28 points in the run (not necessarily in one session!). This is calculate by multiplying the difference between the high at 1101 and the low at 1029 by .38 (I approximated).
Well, there you have it. Tomorrow should be interesting without the FED desks and the boys at the banks.
Good luck.
9 comments:
Today I shorted at 94-95 and covered at 90.5. I did nothing yesterday.
I dunno. I'd guess we fail at 1103 in the near term. You'd have thought we would have learned our lesson and just gone long at 1030. I did for a cup of coffee, but bfd. I think the trick is to wait in the near term and short the right stocks. I think we will see another collapse in the financials soon enough.
David ,
On the Hour chart , is today a cup and Handle ? , To me it look very much like last Fridays pattern.
thanks
Payline,
A cup and handle has a long, smooth rounded bottom with the left and right sides of the bowl even, followed by a dip (less than the depth of the bowl and shorter in duration) that returns to the level of the bowl. A bullish pattern. I do not see it on the intraday chart - though most patterns are fractal, the cup and handle behaves most predictably in longer time frames.
Cheers.
Thanks David ,
I see the $ just made a new low , great...
They may be off tomorrow , but sure are dressing up the futures for the night time .
Good luck out there
David O-
Thanks for sharing your TA as always. I'm learning so plz forgive any ignorance.
A couple of questions if you have time.
Targets for tomorrow? What does that mean exactly? When you start to short or when you cover?
Also, in the interest of learning and improving, I reviewed your extensive TA from Sunday. I focused on the 3 yr weekly closing chart of the DOW and the 100 day closing chart. Correct me if I'm wrong but the longer the time period analyzed the less "interference noise"...hence that longer term focus.
Anyway, on the 3yr chart we inched over the top down trend line that began October 07. Has this trend line failed? At what point would you consider that?
Regarding the 100 day chart, we reentered the wedge up channel. Would you now redraw that channel in a parrallel fashion using the recent Nov 1 low and consider the upchannel intact?
In general, do these breaks upward tell us something?
Again, I am bearish on the economy and believe stock values are way overvalued. But of course, the market doesn't care what I think...it does what it does. I am, therefore, trying to retrain my thinking...not to see it in terms of bull or bear...but simply right or wrong. If the market does what I think it will then I'm right. If not...you get the picture.
Soooo...In early August, when the market didn't correct but started up again I should have listened (if I could understand the language). I should have gone long. My question is, what do you believe the market has just said in the past few days? Not, what do you WANT it to say (with ALL do respect, I assure you).
Perhaps these questions are too obvious or simply reveal my ignorance. My hope is that they sharpen your critical thinking and help me to think better as well.
Thanks again,
Joel
Hey Texas,
The targets that I identified in the post are price points that I believe could be reached on the short (or long) side. For the pattern that presented today, I would look for a break of the floor at 088 before adding short. On the long side, look for a break of 095 to signal a test of 1101. Again - tomorrow is not a typical day for trading so I can not say...
In terms of the charts, always study multiple time periods. The hourly, 15 minute, 5 minute, 3 minute, 1 minute all show volatility. The day, weekly and monthly charts let you stand back a bit. The key is to identify setups in the right time frame and trade what you are comfortable with. Not everyone can daytrade futures contracts for example.
In terms of trend line breaks - first, when you are looking at my 3yr chart you are looking at a closing line chart. This means that until the week is over, the line is not final. If we close above the trend line, that is the first sign of possible failure. We need to see if it extends beyond the line with more conviction. Also, study if the break in trend line is near other important technical points/levels. For the DOW, we have several. All of these can contribute to a pullback below the line.
On the 100 day, leave the original wedge in place and add trend lines that follow the lows and highs of the reaction wave. If you are able to form parallel lines with those trend lines, you have a channel. Otherwise you have something else...
The market is deciding to top or not. All of the technical indications that I have studied suggest that a top is forming right here, right now. If we set new highs, we must begin again with new setups (long or short) - that simple.
Thanks for the questions, I hope my answers make some sense.
Cheers!
Yes, made sense. Thank you for taking the time to answer. Quite helpful. Let's see what happens.
ok - another big gap to hurdle over resistances.. most likely favor longs today..
David , Thanks , And I hope we reverse before , either 40 or 60,
but making a case for it helps to keep us flex able .
I sold out my longs today , well got stopped out, and did not re enter , debating getting back in after hours .
it looks like we have triangles in the XLF and Spx ? as we where on the rise into them , they should break up ?
Looking for one more trip to the top of the March trend line and down, hoping its not 2.
Thanks a bunch David ,
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