Wednesday, March 11, 2009

Follow through?

Yesterday
I had made quite a large review post yesterday. After all this crazyness its important sometimes to re-evluate the big picture and remain objective. While we had a STRONG move yesterday keep in mind the amount of short interest in many of the equities at the moment. Did we find new buyers yesterday, did we halt our acceleration, or did we bottom out?

I do not think we found many new buyers and I still believe we did not find our mid term bottom here but today will tell the story.

Today
Well, we have quite a few scenarios for today. If this is the base for a new short trend we should see a break of the 730 range and a test at the 738-741.

[Mar 4 - Hesitation or hopeless]
However on the technical side, we have now cleanly broken away from the 741/7450 range, however have not given it a proper test as resistance. Major support points are normally always re-attempted as resistance.

I had made this post with the anticipation of the 700 holding which as you can see did not quite occur as we moved a lot closer to my bottom targets and further away from the 700 range. Here at the mid 730 range is where we will make our decision.

If we are to give this a test it needs to occur today, I do not expect today to move sideways or with little volume. We will either see a sell off leading us back into the low 700 range with the 709/716 being reattempted as resistance or a strong continuation day that requires a close above 724 with an intraday test at the mid 730 range.

I will try to post more updates during the day yet again but it is my anticipation that the low or high of the day will be set in the 10:50-11:10 time frames today, so watch this for a turn around either to the upside or a hard break lower.

15 comments:

  1. Just read your review, as always great comments! Thank you.

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  2. Thanks for your excellent analysis!

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  3. while I rather wait to post this, I am very confident now that our top is in for this run and we will continue towards our mid term targets. Of course I could get burned since I am posting this before some required confirmations but I am pretty confident.

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  4. breakdown should be occuring before 1:00 with a possible bottom of 710 before we see some bounce.

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  5. are we saying that the close today is unlikely to be 724 because we didnt test the mid 730 and that were back on our trend down towards 650?

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  6. I made quite a mistake yesterday, something I overlooked (partially to blame on my workstation at home that was dying a slow death with my 5 trade desktops and all the data for the day). 731 was a VERY important number I missed and could have been the perfect short entry. I forgot to switch to my "end of day" desktop which shows the 731 as a 23% retracement of our MAIN high at 945. A little bit mad at myself for not having done my proper review there as I could have given us a great window to fade into a short (731/738/741). While I do not like fades as much, this swing position would have justified the addtional risk.

    Again I am stating some of this before we have all of our signs in place but it makes sense when looking at the overall picture. Of course tomorrow we have the details on possible regulatory changes that could throw us quite a curve ball so we shall see.

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  7. could you share one liner on difference between fade and swing. i do understand fade as get in little at a time?

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  8. fading into a position. Lets take today as an example if it would have played out as I initially assumed. We have a large range for an entry position of 731 and 741. I do not know what the top is but I know that ANY entry in this range will be profitable as it will reverse.

    I would take one short at 731 with 33% of my stake, the market continues rallying and I take another 33% at the 735, market continues rallying and my position shows losses, once we reach 741 I enter my last 33%. While my position is in the red the average price is around 735 so we only need to drop to 735 to break even, anything lower then that and you will see gains.

    On the other hand if we reach 731 and then drop from there I am already in a winning position and can then use the remaining 66% at other retracement levels (724, 716) before I am fully invested.

    I RARELY fade as it carries a lot of risk. What if it goes to 750? then I have a HUGE position that will have quite a few losses. Its just a strategy that when used correctly gives you great entries. Many times in the past tops were not based on price but time (lets say a one hour window). I do not know what price it will be at the top but I can start taking positions at different time intervals (33% every 20 minutes).

    Ok a bit more then one sentence.

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  9. swing trade is just taking a position within an expected trend. For example if we reach the upper/lower range (think bollingers) for a major trend. I take a swing position from one end of the range towards the other end of the range (or the 50% level depending on instrument being traded and strength of the trend)

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  10. Thanks a lot. This makes sense. Thanks again for being patient

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  11. Nice explanation, just want to quickly add something. When chaugner says 33% at a time, I assume he means real dollar value and not the number of shares. When you buy the same dollar amount at each level (as opposed to the same number of shares), you are 'dollar cost averaging'... so you end up buying more shares at the lower prices than you did at the higher prices, bringing your average cost down.

    Ex:
    Buy 100 shares @ 20 and 100 shares @ 10 = 200 shares @ average cost of 15 ($3000 out of pocket)
    Using DCA, buy $1500 @ 20 and $1500 @ 10 = 225 shares at average cost of 13.33 (same $3000)


    Btw, we all make mistakes, and I make a bunch more than you do! I'm sure your blog followers are still very grateful for your analysis. I know I am. :)

    730-732 is also where we gapped down on 3/2 open, very strong resistance.

    I agree that the overall picture points down. Seems people realize that Citi being profitable for 2 months, not including write downs, is not a good excuse to buy! Financials have lost their strength, oil has broken below short-term support, gold is making a nice run, and VIX is heading back towards 45-46 level. Nice trending grind down in the market today.

    Thanks again.

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  12. are we there confirming top?

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  13. George thanks for clearing it up and yes you are correct.

    Sam, yes, you remember the significance of the 724, we now retested it as resistance and did not manage to break it. More and more signs are poiniting towards the top having formed. Good catch.

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  14. there is a small (very small) chance of a turn around here to the upside. But probability of that occuring is very low. If it does happen expect it to be black on white, with extreme strength. Do not see this occuring from here but keep it in the back of your head =)

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  15. Looks like we're back in the downward channel we started earlier. The bulls tried to make a move (fake breakout) but didn't have the strength. The 50 sma on a 5-min chart acted as good resistance... luckily for me my stop was just above.

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