Trading Plan for 12/30
[pay]Pattern notes.
“Houston, we have traction!” And it’s sellers. Tuesday’s close was negative, after six consecutive winning sessions. The negative close was under the noon hour’s low, in a downtrending session (the afternoon high was under the morning’s high).
The six winning sessions were remarkable for their commonalities – gapping up and probing prior highs, then closing positive but under the open’s peak. Despite price advancing day-to-day thanks to the gaps up, buyers weren’t gaining traction. The setup creates pent-up selling pressure. The string of this setup is an accident waiting to happen.
Sellers finally gained traction in the Dec 10-15 sequence. That didn’t prevent Dec 16 from gapping up to probe intraday highs. This marked the beginning of a steep reversal down that retraced all of the prior breakout before Dec 17’s close.
Now comes this instance stretching Dec 21-29. Will Dec 30 gap up, too? Unfinished business at the 1128.50 overnight high’s “new Globex trend extreme” would like that. The illiquid environment hasn’t been enabling of intraday trending, so such a rally effort would be expected to fail. But no further rally is required, at all.
If Wednesday’s open isn’t gapping up, then it may extend Tuesday’s decline. Tuesday afternoon’s drop fulfilled the morning’s no-bias objective of testing its 1121.25 bias-down signal. Monday morning’s 1116.50 objective remains outstanding, and would be triggered under 1120.00. The drop could reach 1115.00 before volume all but evaporates into the afternoon.
Indicators and Internals.
RSIs were overbought at the 1128.50 overnight high, adding to its likelihood of being retested. RSIs were oversold at Tuesday’s 1120.50 post-close low, timing that makes its retest somewhat likely.
Wednesday’s opportunities.
The strategy of selling opening strength has been proved out by Monday and Tuesday’s post-open action. It would take a backseat Wednesday if the open is firm or gapping up. The 1128.50 overnight high could be met more easily in a less liquid environment. But almost any opening weakness would extend Tuesday’s session-long decline. [/pay]