Here’s What’s Great About A First Pullback
Limited follow-through in either
direction has been the major theme of the morning,
yet the 13-minute downtrend remains in interim
intraday control of both major markets. Given this is the second day of a daily
pullback toward support (more on that below), it’s certainly no shock that the
downside follow-through off the 13 has thus far been limited. This may continue
into the afternoon, and thus any
school short
continuation triggers should consider the daily headwind when calculating
reward/risk ratios.
Frankly, it’s one of those days where overnight holds on Tuesday’s late-day
break of the 13 and bearish closing 15MA handle premise turned out to be the
optimal entries, yet overnight always carries additional risk and an inability
to take tight stops — no thanks. For those taking the trade and risk, congrats
and hopefully you’ve taken profits into the early morning retail panic into the
extreme bands. If not, I have this 2×4 I keep next to my desk — it’s been used
quite a bit, but it still does the job. At this end, I’ll be eyeing any late-day
or Thursday shift in the 13 minute charts to see if we get both the three (which
has already turned as we go to press) and 13 on the long side, to consider a
more lasting trade off the first daily pullback.
Which leads us to the daily chart. Yesterday, we took a look at the weekly S&P
charts, which is longer than an eternity (think about that one) for most
“traders.” Scaling back the timeframe a bit, the daily chart is also intriguing
and is setting up for a potential first pullback trade, using a hold of 15MA
trend support as trade and stop premise. Interestingly enough, the 15MA — which
of course is our consistent trend support on all timeframes — and 50-day MA are
in close proximity with each other in the 898 to 904 zone. And like yesterday’s
first pullback entry to Monday’s hourly moonshot, the great thing about a first
pullback is that one can scale out into any immediate pop and then let the
market decide if there’s more potential beyond it, which played out very nicely
yesterday on the hourly.
ES (S&P)Â Â Â Â Â
Wednesday January 8, 2003 11:30 AM ET       NQ
(Nasdaq)
Moving Avg Legend:
5MA
15MA 60-Min 15MA
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