Tuesday, 8 May 2012

Got The Bounce- Now What?

Good Afternoon All,

Sorry for the late post today. Yesterday I was looking for a low risk buy trade into the panic and key support levels after a big Monday morning gap down: http://marketletters.blogspot.com.au/2012/05/monday-morning-panic-buy.html. As anticipated, we held in but the real move only began when the Europeans came in to drive the market higher, and a bear squeeze ensued.

What I wanted to do in this post was try and give a more tactical posture as to where I think we are and the trading scenarios I am looking at. I am aware at times (like yesterday) that I am short term in my view when I see a short term trade lining up. For longer term traders and position traders, this may be confusing somewhat in the bigger picture. I want to attempt to show trading setups and scenarios so that traders of different timeframes can make informed decisions.


S&P500 Daily
Strategic View: Bullish and following the uptrend. Targets 1475/1500. Only a daily close below 1340 would shift my stance to bearish opening up targets of 1290/1300.

Tactical Posture: Still looking to buy this sell off into 1360/1350 (cash). Stops below 1340.

As can be seen here, price is retesting the previous breakout zone and former resistance at 1340 to 1360. This is a low risk BUY area. The Daily trend remains up with all moving averages positive. I think we are in a consolidation/triangle type pattern. Last nights low clipped this pitchfork to a tee.

S&P500 60mins:
Short term view: Price is trading in the low end of the range. 1358/1360 obviously key support then 1350. The Eminis looked to have put in a climatic low at A=C whilst the cash market has put in a HIGHER low thus far. This is bullish if we can hold last nights cash low.

The short term trend is down and thus longer term traders need to look for price to regain 1385/1390 to confirm a new push higher and a confirmed low.

Intraday: we have seen a good rally back into the short term downtrend. Look for good resistance at 1375/1380 and potential shorts. If we fail to sell, look to join this move higher.

Emini S&P500 15mins:
Short term trend remains down. Looking for potential short trades at 1370/1375, looking to buy a retest of 1350/1355. A recapture of 1385 confirms a meaningful bigger picture low.


DAX Daily:
Strategic view: Bullish and following the uptrend. My initial view of a low at 6500 was incorrect. However, my 6400 outlier level was clipped last night and price closed ABOVE 6500. A daily close below 6500/6400 would shift me to cautious. Looking for a retest of previous 2012 highs at 7200.

Tactical posture: Continue to favour buying in this zone, stops below 6400 (note 38.2 Fib comes in at 6350).

Yesterday we saw a bullish reversal candle and close back above 6500. I had 6400/6500 as a key inflection point and for now we are holding in....just.

Adding weight to this scenario is the Eurostoxx:

Eurostoxx Daily:
Bullish Engulfing candle just shy of the 61.8 fib retrace.

Eurostoxx 60mins:
I can count a complete 5 wave decline from the March highs. Yesterdays breakdown and strong recovery is indicative of a potential panic low. There really has been no decent bounce in terms of price or time since the March high and thus I think we are completing/have completed an impulsive down. This implies a good rally in price and time to come lasting at least a month. However, certainly need a lot more confirmation first for position traders.

Short term: Support 2240/2250, Resistance 2300/2350. Only strong breakouts ABOVE 2350 would confirm the count below.

Eurostoxx 60mins ii:
Momentum divergences coming into the low. Price recovered strongly after a initial panic open.


Australia Daily:
Strategic view: Bearish to Neutral. We remain in a solid range and clearly failed at the top end with a Double top trade forming. A close back above 4400 would shift my stance to more bullish.

Tactical posture: looking for a bounce in coming days to initiate short trades against 4400 resistance. This is a great market to pair short vs long other regions.

Climatic reversal out of resistance. However, we have come into good supports in the short term with the 200day moving average and upward trendline. Trend remains up. Range from 4250/4300 to 4400/4450.

XJO 60mins:
Short term view: price is just holding the previous breakout zone and support area at 4320/4300. No confirmation of a meaningful low. Looking to short bounces back into the downtrend until a base pattern/bullish reversal pattern ensues.

Hang Seng Daily:
Strategic view: Bullish and following the uptrend. Concern on a break of the upward sloping trendline. A Daily close below 20,000 would be bearish and confirm onset of a potential C wave down.

Tactical posture: A potential triangle/consolidation pattern continues to play out. Looking for a B wave retest of previous highs.

Price bottomed yesterday right on the upward sloping trendline. If we can hold, look for a continued grind higher to retest previous highs. This scenario is right in the balance.

Hang Seng 60mins:
Short term view: 20,400/20,500 remains key support. As long as this holds, look for potential gap fill targets into 20900/21000. Only a close back above 21,100 would confirm a continued move higher into the (B) wave target.

A Shares Daily:
Strategic view: Bearish to Neutral. Trading at the top end of the recent range. A Daily close above 2600/2650 would be bullish and invalidate this view (see A Shares Daily ii).

Tactical posture: Looking for short setups into this zone.

A Shares Daily ii:
Potential triangle pattern. A break above 2600/2650 invalidates this view. A low risk short zone up here.

Nikkei Daily:
Strategic view: A tactical short term bullish view. Bigger picture unclear and neutral.

Tactical posture: Looking for a short term swing trading BUY into this support zone and previous breakout level. Need to see bullish reversal candles to confirm the setup. No signal for now.

Sensex Daily:
Strategic view: Neutral but BULLISH ON A DAILY CLOSE ABOVE 17,000

Tactical posture: looking to get long on any retests of yesterdays lows.

This is a potential bear trap and A=C support trade. Stops have to be placed under yesterdays lows.

Thanks. Would appreciate any feedback on this format