Wednesday, 14 March 2012

Another One Bites The Dust

Morning All

It certainly wasn't a Tuesday reversal, but a strong trending day instead. They say picking tops is a mugs game and after a strong surge overnight, those trend followers have grounds for justification yet again.

My Daily Double top trade in the S&P500 is certainly off the table. That 1370 sell zone worked for a brief while but there was just no follow through to the downside. I saw a number of markets lining up with climatic patterns, but it just wasn't to be. I do believe there are strategic spots where you can put on potential reversal trades as a Swing Trader and this is where some of my biggest money has been made. However, equally one has to be nimble and heed the market message.

Last nights move to new highs was on strong underling breadth, volume and momentum. Thus for me, I would want to buy the first pullback into the short term trend. As per the chart below, this is in the 1385/1380 region.

Of course we can keep pulling up more and more targets for this rally but so far it has proved futile. 1400 and then 1440/1450 are the next obvious "levels". However, I really thought that if we were going to sell, it was out of that 1370 area. Thus for me, I am just going to keep following these swings higher until we see somekind of climatic pattern which is just not there.

S&P500 60mins:
A strong breakout above the previous highs. No doubt there were a lot of stops above here that spurred the move late in the day. My highest probability trade is to now buy a retest of this breakout level at 1385/1380. Note that we could label this an inverse Head and Shoulder type pattern which projects a move to 1410.

S&P500 Daily:
Last nights strong closing candle puts us well beyond the 1370 Double top level. Sure we are now bumping up against an interesting trendline into round number "1400" which may lead to some short term consolidation/pullback. However, unless we trade meaningfully below yesterdays low, I think you just have to keep focusing on this trend higher. Yesterdays open becomes a line in the sand for bears.

To Australia. My short zone was blown out of the water yesterday/overnight. Really.Quite. Fkng.Amazing.

This is one of the whippiest markets I have ever traded. I can put my hand up and say I just really don't know here. Thus, I will continue to focus on day trading key levels and following the intraday trend.

SPI March continuous 60mins:
We are now testing the top end of the range at 4290/4295 and then the previous highs at 4320. Support now becomes the 4250/55 previous breakdown level.

My SPI range: 4265 to 4300. Outlier levels 4320.

My SPI day trading plan: We are now trading right at the top end of the range after almost a 150pt rally off the recent low. No doubt we are overextended and overbought here. This does not mean we will make a top, but I do think price will pause or consolidate at a minimum before another push higher.

We are looking at a gap up of some 40points. I will look to short fade early at 4295 and 4300 with tight stops. No sell off out of here opens up a move to 4320 so be prepared for the cut and reverse just like yesterday (when 4220/25 res zone didn't work, it was cut and reverse time). Obviously the short term trend is up thus any short fades should be quick and nimble with targets in the low 80s. On the downside, 4260 to 4265 should be well defended and thus I will look for long trades out of this zone. I will also be looking to get long into the moving averages on my 5min chart if we see a deep enough pullback into them.

Note that today will be the last real trading day in the March contract. Keep the June contract up on your screens today as there may be more volume there. Today we have housing starts data and consumer confidence.