Monday, 20 February 2012

Monday Plan

Morning All

The key focus for me as we start the week, is to focus on this new downtrend in Australia. I have been looking for a turn for a while with mixed success, but when the RBA kept those rates on hold, I just knew it was the catalyst to compliment my bearish technical backdrop. Please see this post: The SPI tried to retest that 4250/4255 breakdown level post the announcement a few times but failed. Time to switch guns.

The chart below neatly illustrates this change in market profile. We have transitioned from a clear uptrend, into a congestion pattern/topping pattern, and have now broken through support to start a new downtrend. This remains the case unless 4250 XJO (4220 SPI) is recaptured.

ASX200 Cash 60mins:

ASX200 Daily:
We made a lower high right at the resistance zone. This is bearish. We formed a congestion pattern that broke sharply on Thursday and gave bearish confirmation. Stops for longer term traders should now be placed above this candle.

When I look overseas, I see a number of markets that are "testing" the top end of their range or solid resistance areas. At a minimum I anticipate a pullback and this will not help the bulls in Australia. Note how underperformance which is a key tell about the underlying weakness in our market.

S&P500 Daily:
I have shown this chart a few times. We are clearly in a strong resistance area. Sure for now there have been many false dawns and no doubt it has been resilient. That's what the printing presses do. Patience is key. 1370/1375 looks like the next target if we are not there already. Either way, the upside is really limited vs the risk out there. This is a double top trade that you just have to be prepared for.

Hang Seng Daily:
I put this up on Friday and it worked a treat. The Hang Seng has rallied right into the 61.8 Fib retrace off the high, a potential A=C target, and an open gap. This should be a formidable short zone at 21500 to 21700.

DAX Daily:
Price remains capped right at the A=C target.

My SPI range today: 4150 to 4200. Outlier levels 4130 and 4220.

My SPI day trading range: Monday mornings are always difficult to call given the weekend news events etc. Currencies have opened up quite strongly vs Fridays close and the S&P500 was up small overnight. Thus I imagine we will open anywhere from 4180 to 4190 and right into the short fade zone. I will look to short early with stops above 4200. I will try and short again more aggressively at 4220 if this bounce is stronger than anticipated. On the downside, 4150 held firmly on Friday and this should be the first obvious area to cover shorts. The bigger target is 4120/4125 but I doubt we see this level for a few days. As per my notes above, my plan is to focus on this downtrend with the appropriate risk. We have seen new momentum lows and a clear break of a consolidation range. If this proves to be a bear trap, so be it.

SPI March 60mins:
Clear res zone from 4180 to 4190. Round numbers often also act as target points.