Both Trends
NYSE
volume was lighter than Friday at 1 billion, a
volume ratio of 73, and breadth +1295. The major indices all closed between
+0.5% for the Dow
(
$INDU |
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PowerRating) and +0.8% for the Nasdaq
(
$COMPQ |
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PowerRating). This
didn’t prevent traders from catching both the morning downtrend and the
afternoon uptrend. Both trends gave you entry from two clearly defined patterns.
The downtrend was from a Flip Top Pattern. See your five-minute charts.
Using the Dow as an
example, entry was below 8871, which put it below its 8-, 20- and 60-period
EMAs. Below 8858 also put the Dow below its 50-day EMA, and you might have used
that as a downside pivot for entry. Further confirmation was trading below 8832,
which was the 3-day moving average of the lows, which I suggested you keep track
of. Friday’s low was 8830, for still more confirmation.
The Dow traded down to an
intraday low of 8756, which is just above the 8732 .38 retracement between
10,673 and 7533, and also 87.37, which is the 1.5 volatility band for the DJX
yesterday. Remember, Fib levels come into play both ways. The
.50 retracement between the 8368 – 9077 leg is 8722. I give you these numbers
just so you can record them on your chart, along with the entry patterns for
further reference. It also shapes your trade logic.Â
From this confluence, we
got an excellent uptrend trade from one of my favorite reversal patterns, which
is a 1,2,3 bottom. Yesterday, it was a 1,2,3 higher bottom. There were two good
entries from the 1,2,3, and then confluence with a Slim Jim, which got you in
above 8808 at the highest. The Dow traded up to 8950, then backing off to close
at 8920.
Yesterday’s 8756 low was
a decline of 321 points from the high end of the resistance zone and also the
interim rally high of 9077. If you took the short-term position scale-in short
on SPX
(
$SPX.X |
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PowerRating) from 945 as it traded up to 965 and then back down to an
intraday low of 930 yesterday, you had the chance to ring the register on the
partial amount of units you sold from 945 – 965.
The Aug. 22 reversal day
and full moon — that’s to keep my TradersWire
crew alert — proved to be a good opportunity once again as 965 on the SPX and
9077 on the Dow were the interim tops for this quick air pocket. The Generals
might want to defend some of the rally gains into month end, so be careful on
any intraday shorts with tight stops. The holiday is Monday, and there is no
need to comment on the holiday bias. If the Generals defend the gains into
month’s end, you can count on some program acceleration. FYI: The time period
from Aug. 31 to the end of the first week in September has been down for the
past two years.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS