Trading Plan for 4/16

Friday the 13th wasn’t… lucky for longs. The open’s gap down confirmed that Thursday’s probe above prior highs had failed. The gap down also triggered a “session-long decline” setup. And all of Thursday’s rally was retraced. More to come?

Pattern points… (Setups and technicals)[pay]
A “hold-short through the close” was not compelling, since Friday’s late drop fulfilled its 1366.00-1367.25 objective. And not only because the objective was fulfilled, but because it then held as support (a last-minute post-close spike to 1363.75 was irrelevant).

Closing under 1366.00-1367.25, or never even touching it, could have encouraged holding short through the close. Instead, fulfilling selling pressure makes the pattern vulnerable to a significant bounce. Too much of a vulnerability to too big of a bounce to justify the risk.

To be sure, the downside is potentially quite substantial. Almost any opening weakness Monday would be likely to test at least 1357.00. It could be tested by gapping down, and the open could gap down to and through 1353.50-1355.00.

While gapping 10 points down is likely, there is potential to gap up 10 points since so much selling pressure was fulfilled. The risk:reward is not attractive enough. Sunday night’s open should go a long way to settling the difference.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us if you can for the Saturday Strategy Session at 9:30am ET. We’ll discuss the market’s bigger picture, specific setups that developed during the week, and then take stock requests. [/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.