Tuesday, December 2, 2008

Emm where is the bull?

Well I called for the strong down day, but I would have never expected something like this. My anticipation would have been around the 845 maybe even the 835 mark but never back into the 820's this quickly. I said I expect this down cycle to go into the 820's but that call was getting this number on the 3rd of December.

Regarding my short entry, opening so close to the 865 range I was cocerned about a bounce off this range, instead we kept on going lower and by the time we reached the 859 I was only 14 points away from my first exit leaving me little room for gains but a lot of risk. So no trade for me yesterday at all on a day where we could have shorted off the open for huge gains.

Now eventhough we had a rough day, there is some good to it, yesterday occured on very low volume in comparison to price moves we saw. Thats a good sign for the bulls as this will eventually get reversed.

I expected the downcycle to continue through today with a change of trend on Wednesday but I think we are moving this up. We have to watch volume and price action closely today but with a break of the 820 we could see the bottom in the 806-808 range - the market should not trade lower then this during this cycle. It is also possible that we will have our reversal today, less likly but to be considered since we traded into the bottom range yesterday.

How to trade this?
ok, we have a few things working for us here, we have clear signs and limited risk. If we are to open above the 820 today expect some sell off to bring us back into this range, here would be my first small long position depending on volume. There is a potential to go lower which was indicated by the break of 820 yesterday (though it was more crazy selling on low volume that got us there so I am not going to put as much importance on that break for now). If we do break 820 the bottom should be around the 806-808 range. Here we can go long with a fairly large position with great protection to the downside and good gains.

Short Term
I am still a strong believer of the bear market rally, we established our first leg and need to hold today in the 800 range, if that is to occur we will get back to 900 to re-establish the top range. I would not expect a break on the next 900 attempt but eventually it will be broken. This can most likly form into an ascending triangle with 3-4 attempts at the 900 and higher lows on every attempt. The next 2 days will tell the story but yet again I am confident we will see 900's again possibly Friday.

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