Trading Plan for 1/13
Aaaarrrggghhhh. I gave too much credit to the opening range’s magnetic power. No, actually, I gave it too much credit for too long – 1279.00 was supposed to attract price back down. It did. But I gave no credit to three other factors that facilitated a 5-point surge into the close. Triple argh. [pay]
Pattern points… (Setups and technicals)
One of the three other factors was that the session’s least predictable timing window had just opened. A bounce back up to 1281.00 was certainly expected, but so was 1279.00‘s ability to attract price back down. Reversing back down would have slid sharply to 1272.50. Instead, its rally extended sharply.
Another factor given short-shrift was RSIs diverging positively. Let me say that again. RSIs diverged positively, at 1279.00 support, at a timing window. Oh, and did I mention there already was a requirement for bouncing at least to 1281.00?
1281.00 was too shallow a bounce for buying before such a big drop coming moments later. However, the afternoon’s 1285.75 bias-up target became unfinished business above when the bias environment was exited above the 1281.00 bias-up signal.
Wednesday’s close was the first new high in more than a week. It is a breakout, and now requires confirmation by closing higher Thursday. Except for Wednesday’s late surge, the breakout’s origin and its price action made confirmation unlikely. A visit to 1285.75 is possible in either scenario.
What’s Next… (Outlook and opportunities)
Wednesday’s close before a holiday weekend can foreshadow price action into the holiday. Wednesday’s breakout suggests the trend will persist. The signal can be invalidated Thursday, optimally through its first hour. Rejecting the breakout would suggest resistance was sending price back down.
Before the last half-hour’s randomness became more influential Wednesday, the open’s 1279.00 high did attract price back to it. It should be tested more thoroughly as compensation initially repelling price. The next downleg’s minimum objective would be 1266.00.
Having trended up into the close, a session-long decline would be signaled Thursday by maintaining a gap down under the afternoon’s 1279.00 low. So, holding a test of 1279.00 at the open would be bullish for sellers failing to exploit the opportunity.[/pay]
Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.