I worked the 5 minute chart a bit to illustrate what may happen. Open it:
Several features of the chart worth noting:
1. There is one bottom trend line that serves as the approximate base for the falling wedge with a top line that intersects with A and a channel top line that intersects with B.
2. There is a higher top trend line that intersects with C.
3. The consolidation that took place early last week in the 1060-072 range is now congestion that should provide resistance against any rally attempt.
4. I have highlighted the last three times that the 20p MA moved up through the 50p MA using purple boxes.
5. I have highlighted where we stand with the Stochs and RSI.
When we observe these features we note that the 20p MA has just crossed the 50p MA. We are at the top of the wedge with rising RSI and though the stochs are in over-sold terriory, we see that they can get and stay there for some time (see the prior example).
It is my expectation that we will cross up above the wedge top line at A (043) and price action will pass through the 200p MA (048ish) with a likely test of the top channel line at B (052ish). If shortly after that time the 20p MA does not cross down below the 50p MA, we can expect a slow test of the top trend line at C (072) though the congestion band starting at 060.
I think the move from 043 to 048 will happen quickly as breaks of upper trend lines often happen with volume and force. The 200p MA sits in-between the wedge top line and the channel top line. There may be a pause just above this MA, allowing the 20p MA to catch price action. The question is will the top trend line of the channel hold as resistance and force the 20pMA back down through the 50p MA. If so, we are back to a short setup. If not (more likely), we can expect price action to stick it's head into the congestions and test the high of Thursday at 066ish.
Anyway, just one possible setup to consider.
Good luck out there!
9 comments:
http://slopeofhope.com/2009/11/the-power-of-negative-thinking.html#disqus_thread
http://slopeofhope.com/2009/11/the-power-of-negative-thinking.html#disqus_thread
morning david.. serious drop in the futures.. seems like a tempting setup to go long at open tp break out of that wedge.. but will wait at open to see how it plays out..
Morning Devon,
Oddly enough on the mornings of the FED meetings the market often threatens to crash. Perhaps part of the drama to persuade Ben on interest rates and language!
Watch the dollar and the trend lines for bounces or breaks!
Note the red trend line on my 5 minute chart. It follows the lows off yesterdays bottom to the close. If we pullback, a test of this line near the 20p or 50p MA would be expected. Seems to be near 038. A break of this line, long enough to reverse the direction of the 20p MA down pointing at the 50p MA would represent a good shorting opportunity with a target of yesterdays low 029 and the bottom trend line in the low 020s.
David O, actually the reason I posted the slopeofhope link (and note that I was quite sick yesterday, and I wasn't going to make more than a limited attempt to analyze what most people are saying)was to say that at least one person is saying we will have a continued selloff even while most think it looks like we're going to get another bounce.
I would just have to think that a big squeeze into Wednesday, maybe a bit longer, would be likely, but that we might get some downside before that squeeze...(will look at your chart in a second.) I think a lot of people are thinking this right now, not necessarily a good sign. It is possible that the financials are going to go down NOW.
Interesting. Buffett possibly trying to foment a nifty fifty bubble, using stock for a transaction?
Hey KPH,
I think the slope of hope analyst is calling for an immediate dip to 1005 followed by a significant pop - and the H&S pattern that I seek as well.
Interesting site - thanks for sharing the link, and feel better.
I don't think we go as low as Tim thinks we are going to go. The fed will say something that capitulates to the banks a bit. Right now I keep buying and selling small positions for small profits- am up about 1% with small positions(!) and may just call it a day. Have not been shorting today (although I guess I should have been). gotta go work. gl
OK. Here's what I think is going to happen. "They" just moved the market up 7 or so points for little or no fundamental reasons, squeezing a bit along the way. Of course many highly leveraged speculators are going to short the hell out of the market all the way down from here.
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