The Breakdown Acceleration Phase
Part 2
Today’s session
started with another 8PM breakdown similar to Tuesday’s overnight breakdown.
Last night, it broke the 1970 support level and became an accelerated 1HR 8EMA
bear train. Before the day session had even opened, all three of the immediate
targets were fulfilled at 1960, 1950 and 1937.50.
The morning session
was just a deadcat bounce into the 1970 major resistance which represented the
backtest of the channel line. This provided the bears the opportunity to reload
the shorts with a 1980 stop and for the next few hours the market tanked to the
overnight lows. The session closed strong for bears as it closed near the lows
unlike the previous 3 days where it was sticksaved by 15-30 points in the final
hour.
What’s next?
Daily closed at
1934.50 as a large bearish candle that closed near the lows. It is also one of
the largest one day losses since August 2015. It’s still in the acceleration
phase for the bearish breakdown from last night so nothing has changed in that
regard.
All the immediate
targets were fulfilled today which means that the intermediate roadmap for the
100% measure move of the double top to 1891.75 is working according to plan. The
intermediate targets are now confirmed at 1915, 1900 and 1891.75. The main difference between intermediate and
immediate targets is that it’s a timing issue which means following the train
yields the higher probability trades. For example, it could go back to 1975
resistance first from a deadcat bounce that then gets rejected and heads towards
1915. The main takeaway is to understand your timeframes and acknowledging the current
swing perspective is bearish. Looking for re-entries on swing shorts at
resistances should yield a higher win rate for the time being.
Today’s range was
1991 vs 1928.5, which is 62.5 points and there’s some oversold conditions which
creates a medium possibility that tomorrow would be an inside day rangebound
shakefest. If overnight/morning session doesn’t decisively break the 1928.50 low then it likely becomes
a rangebound session similar to Tuesday Jan 5, 2016.
P.S. as we warned
about stepping in front a train last night, today’s session was the epitome of this
crucial lesson - staying away and hopping onto it instead of getting run over. We
learned this from previous mistakes and hope others don’t have to endure the
hardship in order to fully understand the probabilities associated with
countertrend trades against an established train setup.
