Monday, 4 April 2011

SPI Continous Daily

I highlighted the SPI Continuous previous high at 4922 in my morning post. Today we hit a high of 4924 and are finally selling off. Early days but this is the area for position traders to be getting out of the market/tightening up risk.

SPI Continous Daily:

ASX200/SPI Morning thoughts

The ASX has come along way since I called for a swing low on March the 18th: No doubt I have missed chunks of this move higher as this has been a rapid recovery with only small pullbacks. Ultimately, this thrust has shown the importance of following the trend, of having a clearly defined method for trailing profit stops, and waiting for price to confirm resistance levels rather than pre-empting. Trends will often move higher and for longer than we can comprehend. Such events are important learning lessons and I believe we must go back and study the charts to gain insight as to how we can improve ourselves going forth.

I don't have a clear pattern/setup in early trade. The obvious targets for this move are the previous highs at 4958 on the June contract and 4922 on the continuous contract. For position traders who caught large chunks of this move, I would now recommend getting out of long positions or tightening up risk significantly. We have gone from one emotional extreme to the other and we must always think about the risk/reward. I do believe the bigger picture is bullish but holding onto our open profits is very important. I think now is the time to look for shorter term trades/intraday trades until we see more consolidation or a deeper pullback.

Scenarios I am following today:

i) Look for a retest of Fridays highs at 4902. If we see a clear rejection of 4900/4910, fade the move with very tight stops, look for a 15 point gain or 4875
ii) If there is no strong sell off in the first 30mins, look to buy breakouts from consolidation or buy above the intraday high, targeting the contract highs at 4922.

Res: 4900/4910, then 4922/30
Support: 4875/70, 4855

SPI 2mins: