Trading Plan for 4/4
“Ineffectual optimism” is no way to extend a rally… It doesn’t get much more optimistic than gapping up, probing fresh highs, and spending the entire session in positive territory. And failing to close above the open suggests it might not get much more optimistic than that. So, Friday’s session offers another warning that this upleg is getting old. [pay]
Pattern points… (Setups and technicals)
We already knew less than 10 minutes into the opening 15 minutes of volatility that strong-handed buyers were gone. Negatively diverging RSIs into the pre-open high weren’t being absorbed. And no volatility so far past the open meant the rubber band needed to be stretched further down, first.
The post-open dip was recovered before filling the gap back down to Friday’s close. That was just one among several indications of weak-handed buyers taking over. Another indication was the 1331.25-1333.00 target area being met in the morning, without extending higher during a relevant timing window. Strong hands would have powered through, or else patiently consolidated until their efforts could be leveraged into a breakout.
None of this is debatable, since it was proved by the afternoon dive back to the morning’s lows. The question is whether weak-handed buyers will double-down with higher highs Monday, or if a corrective dip will begin to refuel buyers.
What’s Next… (Outlook and opportunities)
Friday afternoon’s dive back to the morning’s lows proved that weak hands sponsored the morning’s rally. The afternoon’s dive also neutralized the attraction back down to the morning’s oversold RSIs. That is the equivalent to dumping ballast, so it keeps the door open to another rally attempt Sunday night or Monday morning.
Since Friday’s new high close was the first in two days, it is a breakout. Since the breakout was on a Friday, it is unlikely to be confirmed by a higher close Monday. So, fresh highs Monday would be likely to fail – perhaps from the 1338.00 target?
Otherwise, there is no requirement to trade any higher. Gapping down under Thursday’s 1321.00-1322.00 close would make Friday an Island. And while it would make the drop only a temporary correction, the drop would be productive – targeting 1300.00-1304.00.
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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.