Wednesday, January 7, 2009

Nothing left ....

Well, the morning played out as we all thought it would, break of the 935 in the morning hours with a peak at 943.85. We did get a strong sell off from this point but bounced off the previous close price - I have to admit I was surprised at this action especially with a retest in the afternoon - this showed quite a bit of strength left in the market place.

Time is up for the up move, we did have a retest at the 945, something I did not expect and needs to be included for further analysis as this was quite a bullish sign in the mid term. From here on out we should continue on a counter move to the downside. The trade action towards the afternoon will be key today in deciding where we are moving.

Short Term
We have created a nice trade channel now and in my opinion have reached the upper end of the range. The next few days will show if we can sustain the uptrend with a potential bottom of the range at 903-904. Depending on volume we may have a chance to get back into the 885 range but this is something we need to watch after we have broken current support. Here are some of the numbers again in summary that we need to break on the downside.

918-919 - there is a lot of support in this area as this has been the upper edge of the months ascending triangle off the lows.

909-911 - next step down that should be broken if we break the previous point but expect a bounce.

903-904 - again a strong support point that requires some work to get broken. This could potentially be the short term bottom leading us back to a retest of the 945

885 - breaking this could be considering a violation of the up trend and may lead us back to retest the lows.

How to trade this?
If you have no position in the market I would try to remain on the sidelines, I do not believe we will be able to re-attempt any of the highs today. The existing shorts of course have a great way to play out the position and lock in gains. 945 represents a perfect short position with maximum protection - something we always look for. Depending on your trade activity and risk management the 918-922 range may present a way to take off some of the short to lock in profits and protect the gains. You can either re-enter once support is broken or if we get a bounce.

If we are to get a strong down day look for the above support ranges to enter some short term long positions, those should give a 10-15 point gain but carry a lot of risk.

Again as mentioned the afternoon will play an important role today.

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