Trading Plan for 9/16
[pay]Pattern notes.
The structure of Tuesday’s price action was similar to Monday in a four of important ways. The obvious similarity is that each day probed fresh highs. The two most recent sessions were part of the price rise underway since Sep 3.
Less obvious is that each session entered the noon hour fluctuating narrowly around the prior day’s close. A consensus for extending higher was almost an afterthought. This characteristic is new for the series since Sep 3. And it has suddenly appeared in the two most recent sessions.
That “afterthought” is the third important similarity between the past two sessions. Each of the fresh afternoon highs was shallow, and staled quickly, closing back under a prior high. Monday’s futures close dipped back under Friday’s prior high, and Tuesday’s high was retraced back under the morning’s high. Each of the closes was higher than its predecessor, so sellers haven’t yet retaken control.
The final similarity is shared with several others since recent lows, whose morning action included a dip into negative territory. Prior to this week, the rubber band effect has been used to snap price higher. The refueling tactic is still working intraday, but the past two days’ intraday recoveries no longer extend higher through the close.
None of which is a sell signal (new highs are not a sell signal). Similarly, narrow ranging at the lows into Sep 3 was not a buy signal. But the decline’s slowed pace was easily overcome when trending finally started. Now, the rally’s slowed pace is vulnerable.
Indicators and Internals.
RSIs were overbought at Tuesday’s high. It was within minutes of 3:30, very near the window that can disqualify technical readings. The 3-minute RSI was only nominally overbought, and below earlier RSIs. Clearly overbought RSIs accompanying the high would require that high’s eventual retest. This is because it is weak-handed sellers that tend to step into clearly overbought situations. Overbought situations created by weak hands don’t earn the protection of overbought RSIs. So, while this does undermine a bearish argument, it doesn’t diminish the credibility of an immediate decline gaining traction.
Wednesday’s opportunities.
Until sellers retake control on a closing basis, and so long as fresh highs are probed intraday, each new session has the potential to continue trending upward. The possible character of that trending becomes narrower. After two-three days of lackluster afternoon gains, a dramatic push higher is necessary to extend the rally.
It is interesting that this coincides with Tuesday being the first session to develop entirely above August’s highs. This breakout attempt could attract fresh sponsorship from under the woodwork. Otherwise, it may have already done that just to achieve Tuesday’s close, in which case the bottom could drop out – not necessarily at the open, but into the close. Either way, while not required, this is an inflection point that is vulnerable to steep trending intraday.[/pay]