Thursday, 2 February 2012

Double Top Trades

Morning All,

The Emini S&P500 held the low end of the range last night in the low 1300s and we saw a violent squeeze during the European session. With the market rallying back up to 1317, price was way too strong for the Head and Shoulders pattern to be valid and I said on Twitter:

"$ES_F: this is way too strong for a head and shoulders. Thinking we now head back up to 1330. Trade accordingly"
I believe this move now sets up for a great Double Top trade. I talked about scaling into shorts at 1330 and just missed it last night. I believe we may get one more push higher. Interestingly there are some small divergences with the Nasdaq making a new high but the DOW and S&P500 failing to do so. It may be just a matter of time before they do so but either way, I view this as a good low risk double top trade here. This market has been trading in a broad 30pt range for weeks now and thus continue to treat it as such until we see clear confirmation either way. We haven't yet. Sell the top end of the range.
S&P500 Emini 15mins:
Certainly last nights move did appear strong, but it is interesting to note that the DAX has now clipped my 61.8 Fib retrace. Sometimes we do see a small overshoot of these levels before a turn so wait for a Daily confirmation candle.
DAX Daily:
DAX Weekly on the Low:
Don't forget this chart that I put up coming into the October low. Price had a small overshoot of the 61.8 but ultimately contained price. This is the power of these Fib levels as timing tools.
To Australia today. Yesterdays SPI plan and range that I wrote here nailed it yesterday, but my trading did not live up to this unfortunately. I did not really commit to the downtrend enough and I did not execute very well. There is nothing more frustrating then having a sound plan with many scenarios, and not delivering. All we can do is go over our mistakes, learn lessons, and improve for the next day.
I showed this chart on the weekend and it is worth reiterating. The Australian Daily chart has put in a Bearish Candle reversal right out of clear resistance. We saw confirmation of this top with the pullback over the last few days. Thus our highest probability trade is to sell a RETEST of that high.
XJO Daily:
200 ema clipped, candle reversal right at the top end of the range.
SPI March 15mins:
As I said above, our highest probability trade is to sell a retest of this high. This level is 4285 in the SPI and 4300/4315 XJO. We may not get there today obviously but plan for these extremes. Here I have shown potential fade levels at 4255/60 and then right up at 4285. I prefer the latter level given the ABC type structure but as ever, trade the charts. Note that yesterdays open gap proved to be the perfect target for the down move.
My SPI range today: 4220 to 4260. Outlier levels 4285 and 4184.
My SPI plan today: We are looking at a strong gap up this morning of almost 50points right into yesterdays high of 4240. I think such gaps need time to consolidate before we can push higher, especially given the prior 3/4 day weakness. Thus I will look to fade the open straight away if I see weakness out of the 40s. This is for a short term short scalp only. I do think we are likely to push higher at some point later in the day but I will wait for some consolidation before joining this potential new short term trend up. Note that last nights SYCOMM highs were at 4260 and this could well be the target today. If we do get as high as 4285 today, this would be an aggressive short although I view a move that high unlikely today.