The
Pending Breakout Setup*
Today’s session was a bit surprising and tough
to trade even though we pretty much nailed the general road map from last
night’s report. The overnight session was just an accelerated 1HR 8EMA bear
train that hit the 1860 and 1850 targets from the extreme overbought “A+ Tier” signal.
Remember, we use two points as our margin of error so we considered the 1851.25
low as fulfillment.
At 4:00AM, the 30min candle was bull engulf
along with the hourly candle being a doji. This provided the bulls with the
sticksave setup of bouncing at least 25 points bounce as anticipated. The bulls fulfilled that criteria but exceeded
expectations because the bounce was V-shaped and did not even need a solid pullback
. At the day session open, we thought it
was going to pullback a little first based on major resistance line ahead before
it blasts off. The bull train did not care and immediately ran our scalp short
stops, then rode the 8EMA train to 1892 and 1899 resistances in a timely manner.
Overall, the regular trading hours were tough for traders if they didn’t buy
within the first 30mins of open since most of the “easy money” occurred during
the afterhours session.
What’s next?
Daily closed at 1888 as it closed a hair above 8EMA. The
daily context is still a temporary basing pattern with the range being 1850 vs.
1904.25. It’s a shakefest between the range high and low but it’s large enough
to make decent dough trading it.
Current Projections/Road
map:
The overnight pullback targets 1875.5-1869.7 area which is
the 50%-61.8% fib retracement area. Assuming this key zone holds, we expect a
breakout tomorrow above 1899.5 with follow through above 1907.5 to get to the
daily 20EMA target based on the current hourly and daily pattern. However, at
this point this setup is *not a high
probability setup compared to what we normally discuss in the KISS reports.
This is due to fact that tomorrow is a FOMC/Fed day and we currently do not
have a clear edge.
The alternative scenario is that 50%-61.8% fib retracement
area does not hold and the market retests the previous night’s low of 1851.25.
If that level breaks decisively, then it immediately opens up 1844, 1837 and
1830 as possible bear extension target
Current Plan For Tomorrow:
Limit position sizes, or stay in cash because it’s usually
just a shakefest before the 2PM announcement. Then, the market does the initial
move, the false move and the trending move to close the day. No edge, no trade.
