The chart features include:
- The distinct up channel with Red Upper Trend Line Resistance and the Green Lower Trend Line Support.
- The Green Lower Wedge Support line
- A Fib Grid from the last touch of support to the recent touch of resistance
- Several yellow support levels each labeled for clarity
- 20p MA in Pink
- 50p MA in Baby Blue
We are clearly traveling in an up channel that seems to be wedging out. If you compare the RSI at the prior point we touched the upper channel resistance with this last touch, you will note divergence. Now look at the Bollinger Bands. They have constricted and flattened in the last several hours of trade after being pierced to the upside. This shows participant indecision and a possible shift in price direction may occur.
One possible short term setup is to trade the channel as it presents itself. Considering how close we are to the high of the year and where we sit in the current channel, a short with a stop above yesterday's high could be profitable. A safer short would be at the breach of the lower wedge support with a tight stop after the retest of the line. Once 1035 is broken I would expect a test of the 50pMA which is closely aligned with a major support and the 38% retrace of this wave up the channel. From there, I would watch for a test of the 50% retrace level at 1117. Depending on how quickly this takes place, we may or may not, have room to fall furhter within the up channel. The lowest point in the channel that I can see is around 1113. If we break that, back to the 1085 zone.
Good luck out there!
7 comments:
Good to have you back at the desk.
Big day(s)!
Hi David ,
Again shot at the top , fail , shot at the top fail , inside out day on lots , silver and oil ,
Seemed like everything was thrown at it today , maybe we run at it again , but it looks like it is topping to me .
What do you think ?
EWT , it could be a double zig zag , with a bit more up to go , or 1,2 1,2 , down we go .
I think the Xlf will be the key .
take care
RSI for XLF is 71.59. Getting a bit crazy.
Hey Guys,
It is playing out close to what I expected. The analysis of yesterday remains in play. I think we are topping here and will see a retrace to end the week. I would not be surprised by a 20 point down day.
We will see.
David agree 100% , new top or not , may not matter , its tired and over run
David,
Really enjoy your commentary. You got in early on some shorts a while back and most of what you did was greek to me to manage the trade and protect your risk, and I find myself in that situation where I got caught in a gap up on FAS at $78, I took a short, held overnight and got caught in job report gap up, trapped since then and in my largest loser ever. Any advice for how to manage it at this point, watching for opportunity to cost average by adding to short position but nervous with all the up momentum, while trying to avoid taking big loss, versus making it a bigger one.
Hey anon,
Unfortunately these triple inverse instruments can rely destroy wealth quickly. I am not a fan of those instruments. Sometimes it is best to simply byte the bullet, pay the tuition, and get out with a lesson learned. I am looking at the XLF and FAS charts now. FAS is certainly over-bought and it may pull back to test the 84 level soon, but no guarentees. Phase out on throw backs - you are better off redeploying capital elsewhere.
We all have losing trades - shake it off.
Cheers.
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