Trading Plan for 5/19
[pay]Pattern notes.
Too much, too soon? A gap up above 886’50 and quick recovery of 890’00 wasn’t just expected to put buyers back in control. More so, it would make Friday’s selling contrary, and last week’s selling corrective, with a new and powerful upleg gaining steam through the week. That might not be possible if the pace from Monday’s rally doesn’t slow.
Monday’s gap up eventually extended to nearly 909’00 for a 26-point gain. At this pace, prior highs above 9278’00-929’00 will be tested Tuesday. My week-long rally scenario depended upon the Memorial Day holiday’s seasonally bullish influence to pull price higher to or through resistance. That influence isn’t relevant much before Thursday, and sometimes not until next Tuesday.
The powerful upleg need not do much more than probe prior highs – in other words, rally from the range’s lower-end to its upper-end, all within the context of still ranging around 905’00. A second consecutive intraday 26-point gain isn’t predictable, but a break to new highs would be difficult if Tuesday produces anything close.
There’s also the risk that Monday’s rally expended too much energy by already filling the gap back to last Tuesday’s ~905’00 close. That would be the conclusion upon closing Tuesday back under 901’00 where Monday’s last half-hour’s upleg originated. Gapping open under the 898’00 area would take it a step further and signal momentum reversing down, into a session-long decline.
Indicators and Internals.
Overbought 3-minute RSI at Monday’s close wasn’t very reliable timing for creating pullback protection. But gapping down slightly would still be likely to fill the gap before extending down much further. There is otherwise no unfinished business from Monday’s session.
Tuesday’s opportunities.
A gap down under Monday afternoon’s last relative low would put sellers back in control in a big way. Otherwise, simply by not rejecting Monday’s late gain, sellers would signal that they probably aren’t going to prevent a retest of prior highs.[/pay]