A look at the Dow's performance today, a falling wedge pattern and what we believe is an ideal risk/reward play on the potential for a more severe breakdown.
Just wanted to point out that everything one needs to garner from our present markets can be told in this 30min chart of the Dow..
As an example, last weeks saw this Index penetrate the key 17,300 Support Level on multiple occasions..only to rebound instantly which sure looks like an exercise in "Stop Hunting".
And as you can see, the last 1/2 hour of Friday's trade saw a break above the upper line of a 3 day consolidation rectangle(Pink line).
To get a further idea of how vicious this market is look at how many red vs green candles there were in those 3 days..and how the groupings were aligned.
A very unsettled revelation and one that mainly kept us on the sidelines and out of harms way.
So, this Monday the US markets are closed for MLK day so we'll have to see if that last "bullish" candle on Friday is a sign that this pullback might be over or simply short covering before a 3 day weekend...
As far as levels go, let's see how the 17,500 level holds and if so, whether or not the key 17,600 resistance gets tested..
So, below is this past 2 week's activity in the Dow..
The thing to note is the sideways consolidation of yesterday and today(so far).
Also, the many failed breaks below 17,300 area as you just know that the Bears are waiting to pounce on short opportunities..which aren't really following through so far.
So, what are we consolidating from?
Well, either we're consolidating after the recent drop and coiling to break below or on a more macro level, consolidating before another bull run-up..
Either way, as this past Tuesday's action reminds, when you have a micro/macro battle going on, sometimes the safest place to be is on the sidelines.
More to follow for sure...
So, as you can see from the Hourly Dow chart below, the markets have been experiencing a lot of volatility recently.
Today the market was up almost 300 points within an hour of the open only to stall and spend the rest of the day in free fall.
The ideal scenario for us is the opposite..
Market opens 300 lower, stabilizes and then rebounds as no doubt a few of our very strong candidates would get knocked down to desirable levels.
One of the things we bang the table over is sailing with the wind at your back.
When institutional buying comes into a stock, it usually lasts for awhile and if anything, will only pause should the market experience turbulence.
The key distinction here is if that should occur, it's unlikely that these very same buyers would unload their recently acquired positions but rather head for higher ground and resume their buying after the "storm" subsides.
So, we prefer to wait out the storm with them and like the tenacious Tasmanian Devil, be chomping at the same trough when they return too.
It will be interesting to see if the key 17,500 level gets tested once again tomorrow and perhaps caves in.
If so, expect a rather violent move to the recent reaction low of 17,300(last weeks low on the chart).
Either way, we continue to proceed cautiously but have plans in mind should either scenario play out.
See everyone tomorrow...
Nice pattern..could use more volume..but we like the risk/reward parameters.
Remember to place your Sell Stop!
More to follow..
**1/9/2015** A sneak peak at our Premium Posts today which although usually Password protected, we be open for just the remainder of today's session..Make sure to access the Premium Section nested under the "More" menu at the top of the page for current updates during free access days**
As you can see from today's 15min Dow chart below, it's trying to get back above yesterdays support line.
This battle can take place for the remainder of the day or it will start retracting..of which, since it's rocketing higher over the past 2 days, there's a lot of room below.
Staying abreast of market movements is key to our philosophy as we took profits on all our trades during this amazing 2 day run.
More to follow...
**1/9/2015** A sneak peak at a Premium Post that was distributed to our Premium Members in real time yesterday..although usually Password protected, we will keep this page open during the course of today's session**
So, today we suggested buying ARO at $2.68 with a $2.57 Stop...Why?
Well, although this one shot up right out of the gate due to a positive announcement, we want to see how it handles such a pop.
This is why we usually wait until around 10:30 to get involved.
I believe we had our confirmation on the 4th candle, the red down candle, as we really like failed sell off attempts.
It clearly doesn't happen all the time as this one could of easily retraced from such a high perch.
Note our Stop level is below the low of the 2nd candle..which we never even got close to.
This quick pullback ended as the next up candle confirmed our trade even more.
Then we had the 2nd breakout which in this case is a move out of the consolidation rectangle and into the next higher level..kind of like building on blocks.
Anyway, this is a favorable pattern which in combination with a very strong overall market(+300pts at this time) made for a good risk/reward opportunity.
And that's all you can ask for...
A favorable chart pattern, great volume, agreeable Indices and a close stop..
And lastly, we took our profits and ran as the day was winding down and our proprietary indicators showed a large selling band up around the highs at $2.88.
Tomorrow is another day and I'd look at the Pink trend-lines on this chart as support levels.
But as always, we'll wait to for tomorrow when in the trenches to make further decisions on ARO.
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