Well, the winter Olympics is winding down and it's hard to believe that it's almost over! I hope you enjoyed it as much as I did.
I learn so much just by watching and listening to these wonderful athletes around the world. There are so much in common between the Olympics and trading and I absolutely love watching it.
Three Peaks and Domed House
In my posting Three Peaks and Domed House back in Oct 17, 2009, I have discussed a possibility of this pattern being developed and I like to revisit this pattern today.
As this pattern is so complicated that it's subject to the various interpretations and I came up with two different scenarios and the first scenario is "Three Peaks and Domed House" on the daily chart as illustrated below. In this scenario, the peak 28 could drop as low as the peak 10.
Now, how does this pattern go with my Gartley/Butterfly pattern that I discussed last week? Well, Gartley would stop right around 23.6% retracement level and this pattern will go much lower than Feb 5 low. The only problem that I might have with this scenario is that I expect a drop after OPX because of SPX option open interests (see my last week's post for more details) as I expect SPX to be settled right around 1100 for March OPX.. If you are shorting the market with the March put options, please keep that in mind.
Domed House and Three Peaks
The second scenario is "Domed House and Three Peaks". I see the entirely reversal combination within the Domed House as illustrated above. This would be more comprehensive if you look at the hourly chart instead of the daily chart. This pattern looks much more in line with my current market expectation and I will be watching the possible rectangle pattern formation for the coming weeks. In this scenario, the peak 8 is supposed to come back down to the peak 1, which would create the double bottom.
INDU Gartley Update
Well, this pattern still holds, and as we all know, one year anniversary of March 09 bottom is coming and I'm hoping that it brings some kind of volatility into the market. I don't know if I could maintain my mental sanity with another month of sideway consolidation.
SPY Gartley Update
Bullish Scenario
Now, someone asked me what would negate this Gartley pattern and here is my answer: if the market closes above Feb 22's high, then, the market will most likely come to retest the recent high of Jan 19.
Ok, I guess I covered all three scenarios (up, down, and sideway) so I'm covered for next week.
Good luck trading next week, everybody! Enjoy the closing ceremony of the winter Olympics tomorrow (Sunday).
