Trading Plan for 1/30

[pay]Pattern notes.
Thursday’s session-long decline fulfilled the open’s signal, ticking down into the close. The drop started at Wednesday’s intraday low, a big gap above Tuesday’s close, which is where Thursday’s lows settled. That’s a lot of selling. But it isn’t a trend reversal – let alone a sealed top – until closing under a prior pattern’s low.

Thursday’s close did finish under a prior pattern’s highs, the two-week consolidation that preceded Wednesday’s gap up. Failing to recover immediately back above those prior highs would signal that Wednesday’s breakout had failed.

This is similar to the rule that already triggered Thursday, when Wednesday’s breakout was not followed immediately by a second consecutive higher close. Not confirming the breakout doesn’t equate to signaling the breakout failed. A failed breakout gives way to a bigger reversal, whether to refuel for another breakout attempt, or to trend in the opposite direction.

Indicators and Internals.
Despite bouncing nearly 9 points from Thursday’s last-minute low, the overnight rally’s 3-minute RSI has managed repeatedly to avoid becoming overbought. Dips, however, have easily become oversold. Sellers are making the effort.

Friday’s opportunities.
This being a Friday, any trending that comes out of the open is likely to persist well past the noon hour. Afternoon timing windows tend to collapse on each other as participants exit on a different schedule than normal. So an early break under Thursday’s 840’00 lows that doesn’t recover by 10:15 would be likely to extend. The same goes for a break maintained above 851’00. The econ calendar is loaded, with high-profile data due at 8:30, 9:45 and then 9:55.[/pay]