Trading Plan for 8/20
[pay]Pattern notes.
Friday’s last half-hour surge originated from 995’00. The surge reached 1003’00 during the cash session, and extended higher afterward to close at 1006’50. Monday’s open gapped down sharply from there, under Friday’s range. Friday’s lows in the lower 990’s had become “higher prior lows.”
Wednesday’s late-morning surge sliced through this resistance on the way up to 998’00, where a reaction down held the lower 990’s as support. Closing under 995’00-996’00 by as wide of a margin as possible would have further confirmed that Wednesday’s bounce was still part of Tuesday’s correction. The last print accompanying the cash session’s was 995’75.
Without having rejected the bounce up to 995’00-996’00, the path’s next landmark is likely to be filling the gap(s) back to Friday’s 1003’00/1006’50 close(s). Towards this end, Thursday’s bias-up signal is 1000’75, and its target is 1005’25.
But there’s an alternative pattern. It assumes that Wednesday’s close was just repeating the intraday behavior of trending to a relevant level and then hugging it through the relevant timing window. If so, then a higher high triggered above 998’00 would target 1003’00. The main difference from the bias-up parameter is that this would happen early, and the next move would drop rather noticeably back down through 998’00 and the low 990’s, too. By contrast, just reaching the bias-up parameter’s target would suggest expiration will be pointed up.
Expiration may have already started skewing price action. A gap down under Thursday afternoon’s ~992’00 low would have the same effect as the bias-up alternative described above, dropping sharply to make up for lost time.
Indicators and Internals.
Simultaeously oversold RSIs at Wednesday’s pre-open low suggest it will be retested, which means the interim bounce is just that – a bounce, and not a new rally leg. RSIs were simultaneously oversold at the low of Wednesday afternoon’s pullback testing 992’00, too. Buyers attracted to such aggressive sell-offs tend not to be durable. Retesting a single such setup can be the end of it, but now there are two such pieces of unfinished business below the market.
Thursday’s opportunities.
The econ calendar Wednesday was almost non-existant, but that was just the calm before the storm. Thursday’s econ reports are high-profile, influentially-timed and reported in tandem (see comments here). There’s also a fluid news environment otherwise, and the prior session closed at a relevant area instead of already having broken it or rejected it. Whether session-long trending or intraday reversal, it should be an interesting session.[/pay]