Saturday, December 19, 2009

Friday thoughts...

Note, I first started writing this on Saturday, but with all the Christmas prep activities, my time was cut short, so I'm just going to finish it off this Monday morning before the market opens (with the benefit of the overnight futures).

(From Friday) The overnight session would have filled the gap that was created in the cash market had the market been open. But once the market opened, it rallied to my initial sell point and immediately reversed. From there the market put in new lows very close to my buy target at 1090/1092 (low was near 1093) before reversing again and showing bullish signs as it closed nearer the high of the day.

This makes my primary scenario a wave 'B' triangle that finished at Friday's lows. However, the market has the tendancy to do the opposite of what is often times the obvious. I have seen MANY what appeared to be perfect triangles break the opposite direction in a series of 1-2, 1-2, so until Friday's overnight high is broken to the upside (it now has Since Sunday) and the gap filled, there is no surety of what will happen.

What is certain is that triangles are the wave form before a trend change. So the way I like to trade triangles is to wait for their confirmation and then start to build a position near turning point projections with an hourly negative divergence being my buy signals (for puts) or short signals (for stocks). My other entry is to go short on a break of Friday's low with a stop above the last high pivot.

(Monday Update)
Since the triangle pattern is pretty much confirmed now, the most the bears can hope for is some kind of a failed 5th wave in the 786 retracement area (1110/1112) area. Triangles are fast and furious on the way up and the way down. Once it turns over don't expect the market to hang around (remember March 2009? that was the last move down from, you guessed it, a triangle.
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