Trading Plan for 1/22
[pay]Pattern notes.
The morning’s retracement of Tuesday night’s gain was complete, and in that regard Tuesday’s last-minute setup was fulfilled. But Tuesday’s session-long decline setup wasn’t fulfilled, because its session-long decline wasn’t followed by a second day probe of lower lows. That probe is still required.
No template tracks Wednesday afternoon’s relentless rally. The nearest match is the one last Thursday’s recovery eventually followed, which had required a complete retracement of last Thursday afternoon’s gains. Similar to Tuesday’s fulfillment of this setup, if Thursday’s open isn’t gapping down to begin rejecting Wednesday’s recovery, then it is in order to test recent highs at 850’00-852’00 first. And also similar to Tuesday, it is entirely possible for Thursday to end under Tuesday and Wednesday’s lows.
As for gapping down, Wednesday’s last relative low before the last half-hour was 825’00. Gapping open below it would signal a session-long decline. So it is interesting that Wednesday night’s 6-point spike up hasn’t improved and only retraced in three hours since then. Asian markets haven’t yet opened as of this writing, but look out below if that doesn’t reinvigorate buyers.
Indicators and Internals.
Technicals avoided becoming overbought until very late Wednesday afternoon. The only unfinished business left open was at Wednesday’s low, whose 3-minute RSI was also the lowest oversold. The degree of selling there was too strong to be part of a durable bottom, no matter the degree of rally that followed, so its retest remains likely.
Thursday’s opportunities.
Housing Starts and Jobless Claims highlight the day’s econ calendar, either one capable of eliciting strong reaction, and either one capable of explaining why S&Ps haven’t had a lasting reaction to AAPL’s earnings. More high-profile earnings are scheduled, mostly after the close. Thursday’s open should be obviously on its way to either 850’00-852’00 for a new downleg to begin, or else gapping down under 825’00 to try signaling a session-long decline underway.[/pay]