Trading Plan for 10/13
[pay]Pattern notes.
Friday’s late surge began so late that it was likely to be retraced entirely at Monday’s open. And if retraced at all, it would have been extremely vulnerable to reversing down below prior lows. But the late surge wasn’t retraced. Perhaps the Columbus Day wild card inverted the normal reaction, in the absence of any news or other influences. Instead, the retracement was inverted overnight, and Monday’s open gapped up.
Monday’s teenie-tiny ranging was evidence that buyers didn’t gain any new traction from the gap up. The afternoon’s 7-point plunge was further evidence. It’s not yet a reversal signal, but it can be. It can be a big signal that momentum is reversing down. Otherwise, look out above – for awhile, at least.
The signal that momentum is reversing down would be triggered by next closing under Thursday and Friday’s 1065.00 lower prior highs, and their 1061.00 prior lows. A test of 1065.00 was likely anyway. Now that Monday’s dive has bounced optimistically first, closing under 1065.00 would trap a lot of buyers. Closing under 1061.00 would have been in-line for last week’s momentum peak. Now it would indicate the trapped buyers had become active sellers.
Look out above if the Monday’s dive doesn’t extend down through Tuesday’s close. Not just dip intraday, but close down. Three consecutive gaps up since October’s low were finally followed by selling. Closing above Monday’s 1075.00 resistance would indicate that sellers weren’t going to prevent another double-digit gain. They would eventually bring it back to earth, back to the 1054.00 momentum peak, and probably sooner rather than later. But not very soon if not Tuesday.
Monday’s session would have been ineffectual optimism if not for the afternoon plunge. The optimism was still ineffectual, but the session was no longer exclusively optimistic. Avoiding a lower close Tuesday would avoid exploiting Monday’s only pessimism. This would be ineffectual pessimism, so long as this did not include a failed probe above Monday’s highs. There’s no requirement for either buyers or sellers to exert obvious control at this stage. But whichever does not would be unlikely to regain control very soon.
Indicators and Internals.
RSIs were overbought at Monday’s pre-open high. Pre-open extremes don’t require a retest. Less so when they are retested by proxy, and Monday’s high did come within 2 ticks. RSIs became oversold on the afternoon plunge’s low. The actual price low was less oversold, but still oversold, so its retest is required.
Tuesday’s opportunities.
The most recent cash session trending was up, and its 1068.00 afternoon low printed before the last half-hour. Maintaining a gap down under 1068.00 would signal a session-long decline. An immediate recovery above 1075.00 would be credible for extending higher. The econ calendar isn’t much more influential than the past two days. But it will be interesting how the afternoon action behaves ahead of INTC’s post-close earnings.[/pay]