Trading Plan for 6/3

[pay]Pattern notes.
A breakout is only a breakout until it is confirmed. Only then is it a trend. Confirmation Tuesday would have been surprising, since Monday’s breakout was already built on sand. Friday’s first breakout attempt failed to hold above the prior highs it had probed. And Monday’s breakout was optimistically early, and failed to extend several intraday probes higher.

Tuesday’s opening sequence quickly resolved the retest of Monday’s high. Notice the pattern of impatient buyers quickly losing steam? The morning’s high never improved, and an afternoon rally attempt also fizzled. Not surprisingly, the session ended well towards the lower-end of its range.

Buyers didn’t accomplish anything, but neither did sellers. Similar to Monday’s close holding above relevant lows, Tuesday’s close also held above any sell signal. Both sessions ended in decline, and not from increased buying. But other than failing to confirm a breakout – which is not at all bullish for this stage of the pattern – there was no damage to the chart. Not, yet.

Indicators and Internals.
Technicals didn’t reflect much commitment Tuesday afternoon. There was certainly non-confirmation into the highs that proved accurate. But that was just less buying pressure, not divergence. Sellers didn’t break a sweat when falling into the close, although the difference from buyers is that technicals did deteriorate further as price continued to drop.

Wednesday’s opportunities.
A drop has 11-13 points of room down to 930’00-932’00 before sellers gain traction that could reverse the trend down. That’s a lot of selling energy to expend, and then be expected to break support. Any credible selling effort would begin by gapping down sharply, or else after bouncing first. Otherwise, intraday probing of higher highs is possible, perhaps to test the 950’50 area. Gapping up above Tuesday’s 947’75 highs would trigger a session-long uptrend – possibly more of the session-long than of the uptrend. Anything that further delays a pullback would make its inevitable arrival more harmful.[/pay]