Thursday, 11 August 2011

The Test

Morning All,

The volatility continues. I said yesterday that I was out of stocks as the snapback trade had played out, and that I would welcome any overnight retest of Tuesdays lows. Well here it is. To me, it seems everyone sold the bounce in a deemed "dead cat bounce" last night. This is now setting up some great test trades and double bottom trades in Asia today.

The SPI is indicted around 3995/4000. I could see us testing 3970/3975 pretty quickly on the open. I will look to buy this level first and ff this level does not hold, there is room to fall all the way down to  3900/3875 so be nimble and willing to short intraday if we don't hold early. For the bigger picture traders, the next 2 days are great buy opportunties with stops vs Tuesdays lows. It is that simple really to me.

SPI 5mins
These are the intraday levels for the SPI. I don't think we will retest Tuesdays lows so I am looking to buy the Fib retraces. It goes without saying- be nimble.

Given the hammer and bullish reversal out of the 61.8 fib level, you have to buy this dip in Australia to me today offering a great risk/reward trade. Note what happened in March 2010 at a similar juncture with similar characteristics.

All Ords Daily March 2010:
Note the hammer, 1 day follow through followed by a retest of the low that held. I think this is where we are at.

And now:

I am also looking at 1115 and 1100 in the S&P Eminis. We will see pullbacks today of course across Asia and I would be looking for test trades across these markets.