Trading Plan for 5/5

[pay]Pattern notes.
There, but for the grace of sellers, went buyers. Last week’s three consecutive session had each probed two-week old prior highs as support, undermining the breakout attempt’s credibility. It didn’t stop Monday’s opening surge, or the afternoon’s probe of higher highs. Know what else didn’t stop them? Sellers.

Last week’s last three sessions reflected weak buyers. Nothing ever triggered to signal momentum reversing down but the range could still serve as a launch pad. A weak launch pad, but a launch pad nonetheless. And any trending can’t be stronger than the pad launching it. This is one way we know Monday’s selling pressure was nominal, because the session gained.

The narrow overnight range, the open’s aggressive surge, the afternoon’s narrow channel higher, the last-minute surge… Buyers’ existence at this stage depends upon making rally legs that aren’t challenged. Short and/or shallow pullback, interspersed with quickly darting up to a higher level. Intraday gains notwithstanding, it’s still the character of weak buyers, albeit a different side than last week.

Indicators and Internals.
The 3-minute RSI became overbought at the session’s last-minute high. The very next bar touched the same high, neutralizing any pullback protection. The 1-minute RSI was simultaneously overbought at the high, which might require a recovery if the setup appeared at any other time intraday besides the last-minute action.

Tuesday’s opportunities.
Monday morning’s 15-point surge held up through the open by enough margin to expect its twin that afternoon. The afternoon’s 16-point gain from its noon-hour low satisfied this setup, peaking at its 905’00 target, and leaving no unfinished business above. The rally can extend with its weak sponsorship, next targeting 918’00-921’00, and potentially 942’00. Pullbacks have room down to 896’50 without sellers gaining traction. Back under 887’00 – on a close, or by gapping down – would start the attempt to punish the recent weak sellers. [/pay]