The Weekly Bear Train Shorts Re-entry
Friday’s session was fairly slow if traders missed the
overnight rally that busted the 1883.25 resistance with the 1HR 20EMA bull train
into an accelerated 8EMA by the day session open. During the day session, the
bulls got rejected at the 1900 major resistance level on the first try and the
bears tried for a reversal pattern on the hourly chart. However, the intraday
bears failed to confirm the breakdown as the 1881.75-1883 key support level
held and bulls grinded higher. It wasn’t an easy money session for traders if they missed the optimal entry from Thursday’s
overnight entry and looking to hop on the train given that there’s major
resistance ahead. Overall, we decided to take the rest of the day off around
10:30AM as we couldn’t spot any high probability setups left and didn’t want to
partake in a potential shakefest setup. Always
remember cash is a very great trading position to be in.
What’s next?
Daily closed at 1899.25, the bulls got their bottom wick
hammer but it did not close at the exact highs.
Current Facts:
Daily chart is no longer an accelerated 8EMA bear train.
Weekly chart still an established bear train. Monthly has 5 days left for the
candle to close.
Recall last week’s report, we gave a little rant about how “everyone” became bearish in the long term (3-12months out) based on the previous two weeks action. The market has now formed a temporary bottom at 1804.25 and bounced almost 100 points. If you remember, the 1800 vs. 2134 range was the 3 year trading channel we discussed. Now, we are treating the current rally as a daily deadcat bounce vs. the established weekly bear train context. We will be using this thesis until bulls can at minimum clear above the 1967 resistance level which is roughly the half way point of the trading channel. Also, it is just slightly under the 61.8% fib retracement of the December high of 2075 vs. Jan 20’s 1804.25 low.
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Based on current projections, we expect the deadcat bounce to be rejected near the daily 20EMA which is currently 1937 (this number will change at 6PM Sunday open) paired with major horizontal resistance at 1907 and 1927. This means that if the weekly bear train is still strong as we expect, then the bears should reject it at this major resistance area coming up.
The current 100% measure move on the hourly chart for the bulls has a target at 1908. Funny thing is that our initial projection from the Wed Jan 20 report turned out to be fairly accurate. We were off by roughly 3 points as we expected the bulls to hold the overnight pullback at 1833, but instead they held support at 1836.25 and started the higher lows rally. Then, the next day the bulls continued the breakout with the sneaky overnight rally – goes to show that following a plan is much harder than it looks as we did not have much conviction trading on Friday after missing out the optimal entry.
The Upcoming Hourly
Extreme Overbought Signal “A+ Tier” setup
We’re waiting for the signal to confirm on Sunday night or
at Monday’s day session open to potentially short this deadcat bounce for quick
40-50 points down. We will update this in real time when the signal confirms,
but our current expectations are anytime inside the 1907-1927 major resistance region.
Hypothetical Trade
Plan/Road map
Run up to 1910-1920~ major resistance -> short back down
to 1880-1870 based on deadcat bounce thesis -> see if makes a higher low or
continues its way down to retest 1804.25.
(Obviously, a close above daily 20EMA would be unexpected
and we would have to reassess in real-time and adjust our plans accordingly.)
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TLDR: Short-term wise we expect up first until 1907-1927 and
we plan on shorting this deadcat bounce on the daily chart based on weekly bear
train thesis.
