Trading Plan for 4/24
[pay]Pattern notes.
“Curses, foiled again!” – Snidely Whiplash, The Adventures of Rock & Bullwinkle
Thursday was the third consecutive morning that S&Ps probed negative territory, yet reversed up above the open’s highs. On Tuesday and Wednesday, the difficult part of that sequence was reversing back up into positive territory, despite having gapped down. But Thursday’s open gapped up before reversing into negative territory, so the recovery above morning highs was that much more impressive.
Anyway, Thursday’s dip into negative territory was the third consecutive attempt to resume Monday’s downleg. And Thursday’s close was the third consecutive failure to do so. Monday’s Tuesday’s close was the product of a session-long rally, and Wednesday’s late drop still closed above the morning’s low (futures continued dropping after the cash session close). Thursday’s session didn’t turn negative until after gapping up, and a recovery from negative territory extended to new session highs.
That’s three consecutive attempts to resume Monday’s decline. And three consecutive failures. Sound familiar? It’s the same principle that defined Apr 6-8 which tried three times to close decisively under 819’00-821’00. Sellers were foiled again, and the very next session gapped up 17 points. The current pattern’s critical support is 833’50, which has also held multiple probes as support. Is another big gap up coming?
Gap up, or gap down. Higher highs after Thursday’s close have now been retraced, back down to 844’00. Thursday’s last surge expended all near-term buying pressure. This didn’t prevent higher highs after the close, but it’s trying to make them fail. Thursday’s recovery either extends up Friday, or it falls flat on its face. Anything can happen overnight.
Indicators and Internals.
The last technical indication of import Thursday was the simultaneous overbought RSIs (both 1-minute and 3-minute) and the last-minute high. The high was after the cash session close, so it doesn’t require a retest. But overbought is overbought, which benefited the overnight dip.
Friday’s opportunities.
The econ calendar has two high-profile items, and multiple earnings announcements. If a rally isn’t underway quickly to resume Thursday’s gains, then the overnight drop won’t be ignored. [/pay]