As mentioned in the comments of todays post I wanted to describe a wedge breakout and how I trade them (or try to trade them).
Blue Line - as indicated it seems we have not completed the first down move to find a bottom, pre-market we are already quite a bit lower as I am writting this. My best case scenario target for short term bottom is the 816-817 range here. I had drawn fibs with that assumption. From here we should retrace (yellow) either to 23% or 38%. If we break the 23% retracement and go higher switch your graph to 5-min. If you see spinners (long shadow, narrow body) it should finsih the retracement there and continue lower for the last wave down (green). However if you see that the market is trying to create a base and you see strong volume candles with some up and down moves between 23% and 38% (within the circle) it is very possible to continue a bit higher as indicated in the white. This would be a test of the breakout range.
The last part is the green area that usually completes with a 68% move of the first cycle. By the time you have reached the final green circle you know your pattern is in play, and you have great protection if you got in at the top, its hard to explain how it will act further but it is very lily to reattempt the top of the retracement from down there (yellow) as a last move before finally ending up in the big light blue box.
Also on a side note, you can still see my channel from before that could act as another level of support so watch the action in the morning carefully.
seemed to have held at 827 as you anticipated for the 15-20 point rally. Best scenario for today rally to 842??
ReplyDeleteyeap very possible from here to get 15 points out of it off the low.
ReplyDeletethanks :)
ReplyDeletea lot of hesitation. Rally needs to happen fast. Broke previous low already so we need to make a move to upside now or will continue to 816
ReplyDeletemarket not able to take out previous highs. I am long as well but considering exiting soon unless we can take out the last peak there in the next 15 minutes.
ReplyDeletelooking to get out of my long position from yesterday hopefully to break even... assuming this rally gets to 842.
ReplyDelete842.61 high of the day
ReplyDelete826.83 low of the day
=)
We should be done now on the upside. This here had a steep trendline up so it needs to distribute. The next 30 min will tell if it wants to go higher as I had described. It is possible to take out the high and go one more level to the 856 range as well.
thats very helpful to me, thank you.
ReplyDeletewe are right there at 842.5? good entry for short?
ReplyDeleteI am still short and went short via futures here, but not feeling to happy about either one of them. Its more looking like another push up here, and I wish I would have kept my long I did this morning ;p
ReplyDeleteI would probably wait first to see if it keeps on pushing here. While we have hit my targets, we are not seeing sell off, also volume very low up here which is a bit odd. It may just get pushed higher by retail investors buying before the selling starts again.
Thanks Chaugner. yoiu have been great. On west coast I have access to market from 12 to 4PM est. So sometimes it works in my favor and sometime not.
ReplyDeleteI got in SDS,30.62 SRS 68.67, FAZ 10.30 half the position now. other half when it goes to 856 or 839
ReplyDeleteI saw divergence it should come down hard soon
ReplyDeleteis the 856 mentioned earlier not valid now? ...with the divergence just mentioned??
ReplyDeletestill valid, we have not seen a breakout here. Still uptrend but weakening and also wedging, almost done I think. Added a bit more short on top here. Do not think we have momentum to continue higher.
ReplyDeletethanks chris
ReplyDeletegiven the chart from this morning, now that the market is sitting around 845, does that indicate it will stay in the channel rather than dropping (ie. does it make sense to try to build a short position if we hit 850 or just keep my long position.)
ReplyDeleteI am done with my short positions. now just wait for 800
ReplyDeleteSam,
ReplyDeleteYou exited out of your shorts?
... why?
Chris, thanks for the chart
I think done as in no new additions and all set for a run down to 800 =)
ReplyDeleteKat, yeah its a bit difficult to make a call from here. We are trading right between the 23% and 38% however when looking at the 5 min bars you see quite a bit of indecision. Should have been stronger higher volume bars for it to continue on the upside.
ReplyDeleteI did not get out of short I meant i am done buying new ones. I play with small amount. 25K. Still learning the ropes.
ReplyDeleteIf it goes up to 845 again, I am tempted to add short
ReplyDeleteOn a one minute chart 20 and 50 dma are flattening out. Consolidation or distribution? who knows? Chaugner? you are the brain.
ReplyDeleteBought some SPY puts
ReplyDeleteI'll post some pics shortly, but its pointing down from here. Bulls lost momentum after they broke the 23% retracement area. Take a look at the 5 min bars between 23% and 38% (838 - 845).
ReplyDeleteAll bars there are spinners, and formed a wedge that broke out, retraced, retested the upper range and is now ready to head for the low. Do not think we will take out the low of the day but will close pretty even for the day (sideways).
Chaugner, when you have time a short explanation of spinners will be good. Hoe do you spot them. thanks again for your guidance.
ReplyDeleteI will post some pics at the end of the day. In a few trades at the moment so got to focus a bit more =)
ReplyDeleteFollowing my quote "If the market does not do what you thought, change your strategy."
Market not doing what I thought =)
Hat's off to you Chris!:) your commentary was brilliant and helped me greatly! Thanks. im out of my long position(break even with a huge sigh of relief! lol)
ReplyDeleteWill go short depending on what this crazy market place decides to do...youre analysis as always is priceless!!
do you see it to be prudent to put some type stoploss in a worstcase scxenario if it turns out to go up or would rather add shorts say at around 860-865?
ReplyDeletestop loss for sure. If we break the high of today I feel we may go quite a bit higher. My large SDS position I will keep regardless, however all my other shorts for the day have stops at high of the day.
ReplyDeleteI will post some more analysis tonight so you can see how we can determine that there is a 90% chance that we will not revisit the high of the day. Its difficult now in the middle of trading since I have quite a few positions. I am currently 100% in positions. Looking at it now, they are all short =)
expecting to revisit 832 but now lower.
ReplyDeleteThanks you are right down movement has started.
ReplyDeletelooks like the bulls decided to lure is into shorting there just to cover on the rally to get more buying.
ReplyDeleteStopped out ... sigh
darn. just got stoppedout in srs and sds may be better opportunity further down
ReplyDeleteare the next two significant resistance levels at 856 and then at 864?
ReplyDeleteI see double top with negative divergence on es. what do you think Chaugner. do you think we will see new high/
ReplyDeleteStaying out regardless, waiting for better setup. And I have gotten beat on my positions already and its 3:00. No new positions after 3:00 and I tried to trade a pattern that failed. Not chasing it and trying to "read" another pattern to get me to trade. It would just be another "short" pattern ;p
ReplyDeleteUpdate will clear it up today after we close. Those last 5 min bars "should" not have been there and invalidated my strategy.
I am stopped out in all positons except my IRA account. I am keeping those.
ReplyDeleteyeap same here. Though crying over my SDS position. From up 7+% to 2.7% .... without a hedge since I did not believe we would break the 38% retracement (my 842-844).
ReplyDeleteAnd here we are ....
851 next stop for 50% retrace of the down move.
ReplyDeleteI see more and more divergence. Drop down will be very big whenever it happens. May be after tomorrow's gap up.
ReplyDeleteI think 851-852 is it for the top
ReplyDeletebought faz 9.77 could not resist
ReplyDeleteyeah maybe its time to change my rule and allow trading after 3:00PM.
ReplyDeletewe are at junction either up to 852-856 or down to open number
ReplyDelete