Tuesday, 6 December 2011

Reversal Tuesdays


My bigger picture thoughts remain here: http://swingtradersedge.blogspot.com/2011/12/little-present-from-santa.html.

In the short term, this uptrend continues to wane and I have growing conviction that we are set for a decent pullback today. Headlines that S&P have put 15 countries on credit watch should certainly act as a short term catalyst although AUD has taken this announcement very well. However, as ever we let the underlying price and the technical picture be our guide.

Yesterday I wrote "Thus all in all, I am looking for potential fade trades (going short) in the next 24/48hrs. This is fighting the short term trend and is a short term trade only. I usually look for reversals on Tuesdays so today's bearish outlook may be premature.  However, the risk/reward and technical outlook favours this setup.....The latter level at 4350 offers a great low risk fade level."

Last night the SPI rallied right up to the ideal 4350 short level, reaching a high of 4360, before falling 30pts to close at 4332. The chart below shows the perfect setup last night. As you can see, Price tested the double top area and sold off, potentially completing a 5 wave advance out of the recent triangle. Couple this with the bearish divergences I am seeing, the waning breadth, and a potential 3 Indians/Ending Wedge in the Eminis, and I have to remain a seller. I have often found that Tuesdays are a great day of the week for reversals and trending moves (don't ask, it is just experience).  

My range today: 4280 to 4340 (wide I know)

My plan today: The SPI is indicated at 4332. I would be a seller early in the mid to high 30s. Stops should be placed above 4345 or 4350 depending on your timeframe. Yesterday we saw strong support at 4295/4300 and this should very much be the case again today. Look to cover there and add/re initiate shorts on a break of this zone with a potential move down to 4265/4270. The SYCOM highs are at 4360 and ultimately any move above there invalidates my bearish interpretation leaving the potential for a move to 4400 in coming days. 

The RBA interest decision at 2.30pm will be a major catalyst. Day traders should be flat into this. The market is pricing in a 63% chance of a cut currently. I think they will cut for what its worth.

SPI Dec 5mins:

Emini Dec 15mins:
A 3 Peaks pattern and Ending Diagonal pattern. Looking for a breakdown to 1220.