Friday, April 3, 2009

Updated Pattern Expectations and Probable New Short-term Blog Trade

Click on Chart to Enlarge

The chart above is SPY as of Friday's close. I have some projections and a few notes on the chart I will quickly put into words. First off, I would expect the top of this rally to occur below the pink horizontal line. That is due to the price pattern that has formed over the last few months. If that holds true, it is easy to see the potential reward is very small compared to downside risk at this point in the rally.

The solid lime green line was the pattern I drew out 2 weeks ago for expectations of a contracting triangle to form. It does not appear that a classic contracting triangle is forming at this point, but you can see that the highs and lows so far have been occuring at the expected time. Because of that, I don't think the timing of that expectation will be too far off, but I have drawn in a new projection in dotted dark green for my new expectation.

The short-term model for the Nasdaq became overbought near closing time today so that justifies a new bearish short-term blog trade at this point with QID the likely fund of choice. I will make a blog post either Sunday evening or Monday morning with instructions regarding that trade. But for right now, just expect to buy QID at the open on Monday, especially if there is a gap up on Monday.

About 2 weeks ago we saw some stalling candlestick patterns that led to a little pullback and a successful blog trade on SDS. Now that we are at new highs above those levels, it would be nice to see a solid reversal candlestick pattern to indicate that a short-term (at minimum) top has been made.

With each move higher here, I feel more confident that we are very close to a significant high in price, but I am not sure if the market will form a sharp top or if it will stall and form a failed breakout or two before heading down with more conviction.


No comments:

Post a Comment