Trading Plan for 10/6
[pay]Pattern notes.
Monday’s initial dip wasn’t immediately absorbed at the 1022.00-1023.00 pullback target. But once it finally began, the reaction up produced new session highs at 1031.00 almost immediately. That was stage one. Stage two was two more surges through the day that produced two consecutive higher highs into the 1038.50 peak.
The session’s last upleg followed the afternoon’s no-bias environment lapsing after 2:30, so its gain doesn’t require being retraced. It doesn’t need a requirement to be retraced – the first stage was a very bearish setup. More than requiring its retracement, the setup taints any subsequent buying, trapping buyers to help fuel a much bigger downleg.
First things, first. Monday afternoon’s 1039.00 bias-up target is still likely to be tested. Perhaps its test will include the 1042.00 bounce potential. If the bounce isn’t rejected there, then the gap back up to 1054.00 could be filled. A close above 1054.00 would be more bullish.
It’s all in the name of refueling sellers, a corrective bounce whose ultimate resolution should include a retest of Friday’s pre-open 1012.00 low. Back under the 1034.00 area would start to signal momentum reversing down already.
Indicators and Internals.
RSIs were oversold at the open’s initial low, requiring its eventual retest. RSIs were overbought at the afternoon’s high, whose retest is also required. Price was able to get away from the low’s orbit since it developed during the open’s first 15 minutes of volatility. The afternoon’s high was still keeping price nearby as of Monday’s close. Its retest overnight would satisfy the requirement.
Tuesday’s opportunities.
The econ calendar isn’t totally empty, but it is comprised primarily of non-controversial items. They might inhibit trending until released, but they won’t influence it without being very surprising. Retesting Monday’s high overnight would be likely to at least touch 1039.00 or even 1042.00. In either case, reversing back under 1034.00 would signal momentum reversing down hard. Falling back under 1034.00 first wouldn’t generate the same confidence of a reversal. It would get a benefit of the doubt, and a tight trailing stop. [/pay]