Bears Wish Granted
Today’s session displayed an exquisite hard-fought battle between both sides. Before the day session had opened, the market rallied into 2087 1HR 200SMA major resistance level which coincidentally was also the 50% fib retracement of 2110.25 vs 2062. This meant that bears had a great short setup using the standard initial risk 3 for 10 points strategy. (That turned into a trailing winner)
When the day session opened, the market quickly rolled over and the first hourly closed below the 1HR 20EMA. This indicated that the bears were for real and they had momentum. Then, when the 1HR 50SMA could not even bounce on the first try - the possibility for a bear train day was strong. At that point, the bears that shorted around 2085 had their target fulfilled and beyond. It was a perfect 5m 8EMA re-entries bear train up until 10:45AM. Subsequently, in the last 10minutes of the 10AM –the bulls managed a sticksave and the hourly bar closed as a bottom wick. That was reminiscent of Nov 10’s 10AM large hourly bottom wick sticksave. At the time, we noted the possibility of bulls having a corrective bounce back to 2075-2077 based on the hourly close and some short-term oversold signals that we were planning to re-short.
Surprisingly, the bulls managed to extend the corrective bounce to a high of 2082.50 which was still a lower high on the 15m extended hours chart and it was a double top on the day session chart. In addition, the bear flag channel really helped us stay in the short trade as we entered a little early with an average of 2077.8~. We were almost stopped out by this surprise bull extension, but then the bears managed to form a 15m top wick setup. Minutes after, price broke down and confirmed the bearish setup. The latter half of the day was just a standard 5m 8EMA and 20EMA re-entries bear train, but it was a bit frustrating as it stalled until the end of the day for the LOD breakdown. Patience is required for bears to make money.
What’s next?
Daily closed at 2068.50, this is the 15th consecutive close above the daily 200SMA. It is also the third session that closed below the daily 8EMA.
Bears got what they wanted today by closing at the lows with daily lower high top wick rejection candle. Now, they need a breakdown tomorrow or on Friday to confirm the setup.
As long as price remains below 2085, the immediate targets are 2060-2057, 2051 and 2035.
If above 2085, then the immediate targets are back to 2092, 2100 and 2110.
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The Daily Extreme Overbought Signal
Upon further review, a close under 2060 is needed to confirm the setup and the immediate target is 25-30 points down which could produce an extension up to 70-100 points if bears can prove their momentum. (Previously, we stated it needs price go under 2070 decisively in the weekend report). Again, we do not have an executed win rate for the daily signal, but the executed win rate for the hourly overbought/oversold signal remains at 80% over the years with multiple instruments we traded.
The first try at Daily 20EMA is a BTFD setup
At this point, the risk 5-10 for 20-30 points bounce setup is still valid when price gets to the 2058 daily 20EMA with the daily 200SMA just a hair under it. However, the current price pattern is setting up for a large and quick move down so we are going to be cautious and may not be taking this trade setup as it contradicts our day trading game plan.
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Review the 5minute and 15minute charts for day trading trains
