Trading Plan for 2/8

Impatient buyers. Can’t live with them… The open’s gap up and its running correction were signs that strong hands weren’t sponsoring the rally’s latest upleg. Its early peak and afternoon dip suggest that stronger sellers are starting to bite. [pay]

Pattern points… (Setups and technicals)
Rising wedges in uptrend tend to surge first, plateau and then retrace fully. Two out of three ain’t bad? Monday’s rising wedge has yet to retrace fully under its 1312.50 low. Both the first and second dips back into the pattern bounced, so the third dip is likelier to compensate for the delay by retracing the last relative low back to 1310.00.

“Lower prior highs” at 1308.00 and at 1306.00 could also be tested. Testing either would mean the dip had retraced into a prior session’s range. Monday’s 1310.50 opening gap would then help to attract price higher. Retesting 1310.50 from 1308.00 and at 1306.00 would neutralize its attraction above.

Gapping down first would also create unfinished business above at 1315.75, which is Monday’s equivalent to the cash session close.

I don’t have a template that allows for extending higher. Monday’s 1320.00 high can be probed, but only in the context of a retest, perhaps up to 1324.00. Regardless, a new rally leg would require a deeper dip, or an extended multi-session sideways ranging.

What’s Next… (Outlook and opportunities)
Monday afternoon’s dip left something on the table by bouncing to 1317.00. Rather than touch 1312.50 first, now a more reliable bounce must originate from under 1310.00. Gapping down to test 1308.00 or 1306.00 probably wouldn’t gain traction, and should recover temporarily to test 1310.50 and 1315.75. Rallying first to test Monday’s highs could target 1324.00.[/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.