Trading Plan for 12/24

If Tuesday”s gap up weren”t so high… then its reaction down could have limited the session”s range to overlapping prior highs. Instead, the session ranged almost exclusively above all prior intraday highs, which is optimism. And it didn”t trend higher, which is ineffectual optimism.

Pattern points… (Setups and technicals)
A potentially bearish setup formed Tuesday by gapping up to new highs, and then essentially ranging exclusively above all prior intraday highs — for the first time in the rally. No unfinished business was left outstanding above, since the gap”s opening print was neutralized after touching a prior session”s high.

Emphasis should be placed on the word “setup.” This is not yet a signal, which would be triggered through Wednesday”s opening 15 minutes of volatility. A normal length session would be able to trigger in the afternoon following a failed morning probe of fresh highs. But that”s not an option for Wednesday”s holiday shortened session.

There is no higher target in-play, and hasn”t been, other than to retest prior highs. That was already fulfilled without putting into play a higher target, beginning a process of distribution.

Those same holiday-shortened hours that limit the paths down may save the day by inhibiting sponsorship from driving price lower. Having said that, sponsorship isn”t necessary to begin a correction.

What”s Next… (Outlook and opportunities)
Regardless of the setup or the trigger, Wednesday”s early close (and Thursday”s close) have already begun inhibiting participation. Be careful not to force trades. Consider exiting more often into an objective”s test, and being less tolerant of a pullback limit or bounce limit test.