Wednesday, February 4, 2009

On the wrong side ...

We continue to remain on very low volume in a narrow range pattern. I was a bit surprised at the trade action in the late afternoon to be honest, something I did not expect and needs to be addressed. I said that my feel for a top out should be around the 837-838 mark and we stopped right there just before 3:00. Here is where I thought we would keep it for the day but we ended up jumping one last step towards the 842 and closed at 838. While we reversed this last jump quickly we still managed to close in the upper ranges.

We can clearly see that we are spot on with our narrow ranges and low volume but the bearish tone is definitly not in the market. We were able to create a slow up channel off the monday lows, something I felt would occur on the downside if any.

Well the market got a bit ahead of itself yesterday so watch for the top out to occur around the 10:45-11:00 mark. This would be inline with a 1:1 ratio of our drops from wednesday last week. Volume here is the key and I can see us giving the 842 one last test - time is important here so do not chase it. If volume picks up while we are approaching 842 - something that should not occur watch for a break to setup for a suckers rally with a potential of 846-847. It is very unlikly to breakout on the upside from here on out so do not be fooled by this rally if it is to occur.

How to trade this?
Well, if you have to dabble in the markets today use this as a short entry window but keep in mind that its a medium probability and medium risk trade. Its not as safe as I would like so try to perfect the entry and lower your capital on the trade so its easier to get rid of it. This is one of those trades that you either hit perfectly or walk away from.

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