Tuesday, July 27, 2010

No bearish price action...yet

As much as I would like to see a bearish impulsive move to the downside, I have yet to see it. The first move down off the highs was 8pts, so I am labeling that our subminuette wave 4. Then we got the spike back up to retest the highs, and I am labeling that minuette wave 3. We then got a move down (11.5pts) followed by a consolidation triangle for the remainder of the day.

So where do we go from here. Here are my scenarios:

Primary Count: we are finishing up a B/X wave triangle and will break to the downside. Buyers should step it up around the 1106 area. The hourly 34 SMA is likely to be tested (currently at 1099.5) during this move. A move that closes below 1083 would be highly bearish. How would I trade this scenario? I would enter the first 15 min reversal bar to the upside after a break of the triangle. However, if no reversal bar comes before 1090 I would break off the trade or go with a reduced position. My stop is 1 pt below the entry bar.

Secondary Count: we finished a skewed subminuette wave 4 in the triangle, and we will break to the upside to finish off minuette wave 3. If you wanted an aggressive long trade, then I would go long on a move above 1117 with a profit target at a new high. I would, however, look for the short trade on this count to the downside looking for the first 15 min bar reversal after hitting new highs.
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