Wednesday, April 29, 2009

Looks Like a Good Bearish Set-up

Click on Chart to Enlarge

Today's chart is a little bit loaded, but the bottom line is that I think this bearish set-up is the best one from a charting standpoint that we have seen yet in this rally. The chart notes are self explanatory so look at the chart for those. Since the market is currently in a solid trend, divergent oscillator indicators will help show a weakening trend, but watching key moving averages will be the simplest and maybe safest way to get confirmation of a potential trend reversal. I would watch the 21 day EMA or 20 day simple MA for a close below it.

There has been a very consistent tendency for the market to give back FOMC day gains over the next 2 to 3 days if it gaps up and then closes 1% higher or more like it did today. The current sell order for BGZ is based on the fill of today's gap up. Hopefully that occurs by Friday for a nice quick trade.

As a side note, QQQQ and XLK (tech fund) showed bearish? shooting star type candles and lagged the other indexes today. XLF (financials) were well off from making a new rally high, and that is a non-confirmation that has occurred at intermediate tops with frequency during this bear market.

While I think things are set up for a larger decline, I am suggesting to use a limit order of 47.68 until Friday to hopefully sell BGZ before the upcoming bank stress test results next week.


1 comment:

  1. bears are really feeling the pressure with a gap up opening today.

    Comparison studies show that in the past, sizeable gap ups the day after an FOMC meeting almost always close below the open.

    If the market falls from shortly after the open, my inclination is to get stops in on BGZ above the highs.

    I think the alternate scenario (which I haven't taken very seriously) to the formation of a top near these levels would be a blow off type of move up real hard for a couple weeks and all the chips go in so to speak. Bulls throwing caution to the wind....Because of that possibility I am inclined to get stops in relatively quick on this.