Thursday, December 11, 2008

Stop already ...

Well two days this week where I was off on my call. On monday I had called for a change of trend - did not occur, yesterday I called for a decision day - did not happen either. On the positive side both of my trade calls worked out yesterday but as you could see from my advise staying out was the best thing to do as the gains were very limited. Short at the 910 (high of the day 908.27), long at the 890 (low of the day 885.45). The risk-reward ratio for both of these trades did not justify a position for the normal traders. I did end up going short at the 908 and closed out at 889.

Today & Short Term
We are currently going through a very bearish formation, from our rally off the 770 range we have created a bearish rising wedge - and the last 3 days have added small bars - meaning we closed very close to the previous open. The longer we remain in this formation the more drastic the move to the downside will be. Again, from here on out we only have 2 possibilities, another low volume small bar or the start of the downturn.

You all know how bullish I have been in the past 2 weeks but price, time and volume speak for themselves here. My expectation was a run up as part of a ascending triangle with a final break that will bring is into the 900 range with momentum - this has not occured and therefore we have to adjust on how we look at the market going forward. We have the holidays coming so this could work in the markets favor by remaining lower on volume and staying in a tighter trade range until the new year where we would break hard to the downside.

How to trade?
Again I have to advise to remain on the sidelines. From a trade perspective the short would be back at our top in the 917 range, 910 does not represent a good short today so stay away - I would rather be wrong here then carry this much risk into a trade.

On the long end, we have now established the 888-890 range as a strong support. Here is were we could enter a fairly protected position however gains again are limited. Since we are on the upper end of the trade range it is very difficult to justify a long here as well as we have more potential on the lower end as we have on the upper end.

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