So my analysis from last night is a little "behind" the look of the start to today, but the bigger thesis is still fine. There will be plenty of doubters of any rally, but if you look at the charts, the rally makes sense as we are "now" finished a normal 61.8% market pull-back.
The bigger targets from my earlier blogs are still valid, so let's look at the near term resistance levels and what the bounce may look like over the next couple of days.
Since "positive" news from Europe has caused the market bounce overnight, we should start by looking at the Euro …
Euro ETF (FXE) 60-Minute Chart
The pre-market indication for the FXE is around $132.95 – $133.00. If this rally in the markets is going to get going, then a move above the $133.50 level will cause a big squeeze in the massive Euro short (see blog from Nov 20th … "The Euro … Is that Bet Too One-Sided?").
A failure for the Euro to hold these pre-market levels may just mean a small retracement before the squeeze starts, but if price refuses to fall at all, then the chance of a squeeze goes up big-time.
Keep your eye on the Euro the next couple of days for hints of how the Squeeze in equities may unfold.
SPY 60-Minute Chart
As Ninja Level-9 traders, what do we do on the start of a potential reversal? We slap-up our Fibonacci retracement grids of course!!
Then we look to previous areas of support which will act as resistance as we bounce … that area for today looks like the $118.80 – $120.25 area. Right now, the pre-market indication is just a bit higher than $119.00. I am expecting price to not retrace very much at all today … there is a lot of money on the sidelines or caught short here this morning, and that should create a nice level of buying under any small retracements today. The retracements we see will tell us a lot about the potential for the market the next couple of days.
So I am expecting price to stay inside that area of 1st resistance today, with the majority of the move in the books at the open. The key is to assess the shape of the move for the next couple of days and to get positioned for that move to come.
The above chart maps out the possible price path for the next couple of days … the more we have a normal retracement from this 1st push higher, the easier it is to project out a potential target for the next move higher. If price refuses to pull-back very much (like the Oct 4th-27th rally), the harder it is to predict out the next level. If that is the case, then you have to just be long and hold your nose.
Again, traders need to focus on the big picture … is the retracement off of the Oct highs over? If it is then we should get a multiple week rally as part of the next bigger wave higher … yes Virginia, there is a Santa Claus (rally)!!
AAPL 60-Minute Chart
The above chart looks at the levels on AAPL's chart for resistance … pre-mkt trading shows we are at about $372.60ish, so AAPL has some room to run today.
Continuation Patterns
So how do Day Traders get involved in a day that Gaps higher like today is likely to do … assuming that today doesn't fail and I think that is a 90%+ odds trade, it will be crucial to BUY THAT FIRST PULLBACK. If you do get that first pull-back, do yourself a favor and keep a small piece on all day … DON'T TOUCH IT … let it stay on the books all day.
If today unfolds as is typical for days and set-ups like this, traders will be scrambling to get long all day … the non-believers will be trying to short any little/minor top in price and will then have to scramble to cover as buyers come in to support the price.
My strategy is to have a piece on all-day which I will sell at the close. I am going to buy ALL pull-backs and then sell this trading position as price makes a new high and my RSI(2) indicator on the 3-minute chart gets to around that key 90 level. Lather, rinse and repeat all day. Today is one of those Trend Days where day traders need to make most of their money. Trend Days are much easier than Range Days … TAKE ADVANTAGE OF THEM.
So do yourself a favor and slap a Continuation Grid on the first pull-back and then get long above the 61.8% and then add-on in the GAP or on the break higher.
LOCK AND LOAD TRADERS …
Cheers … Leaf_West (visti my site … http://blog.tradingwithleafwest.com/)
