Trading Plan for 4/17

[pay]Pattern notes.
Thursday’s session was on-track for just another day ranging around 844’00. The open reversed down from its 854’50 gap up limit, which was later revisited after a brief detour down to 844’00. A dip back down to 849’00 reversed up 18 points up to new highs at 867’00. The 854’50 level also represented last Thursday’s pivotal high, the high prior to Monday’s 861’75 actual high.

I hate to kick a market when it’s up, but here goes.

After holding two dubious tests, the pivotal high’s third test put into play the actual high. The late surge’s optimism was neutralized by fulfilling unfinished business at higher prices, within several minutes of having created it. The close retraced 7 points from the high, which wasn’t bearish until retracement ended back at Monday’s prior high. This means buyers didn’t gain any new traction, so it could still be characterized as part of the existing range around 844’00.

That late surge also ignored a no-bias environment, so its gain from 852’00 should still be retraced. The retracement need not begin immediately, and it need not extend in the opposite direction. Thursday’s high is likely to be probed first, unless Friday’s open were to gap down under Thursday’s 854’50 prior highs.

All of which makes it difficult for Thursday’s new high close to qualify as a breakout, because this requires a second consecutive higher close. The no-bias rally’s retracement could be delayed until Monday – it often is delayed by two days when not retraced in the same session it was created. A quick retracement Friday morning could still recover to close at higher highs. With at least two scenarios for extending the rally, not doing so would suggest ample selling pressure, and probably be a sharply lower close.

Indicators and Internals.
Another problem for recovering Friday is that 3-minute RSI was overbought throughout the rally’s last 10 points. This tends to be followed by a significant retracement. Thursday’s close had already alleviated the overbought situation, so this instance might get a pass. It probably needs one if Thursday’s new high close is going to be confirmed as a breakout.

Friday’s opportunities.
Earnings continue to influence price action, and Citi is due before Monday’s open. Consumer Sentiment comes 25 minutes after the open, timing that can influence any initial trending underway. Fed Chair Bernanke is scheduled to speak at noon, which can influence eyelids. This being a Friday, the morning’s bias signal is likely to persist past the noon hour, so it probably can’t be no-bias if the speach contains any surprises. [/pay]