Tuesday February 23, 2016
Key Developments :
- Market gaps lower and acquires H&S Target from last nights report.
- Gap from Friday not 100% filled, but pretty close.
- Still 3 down gaps to fill from this rally.
Yesterday we talked about 2 warning signs that the market wanted to pull back.
1) The hourly chart momentum divergence.
2) H&S pattern below key resistance.
Even if you didn’t hold short overnight as I did, this morning gave you a great, low risk entry point below neckline resistance at about 1940. It was admitidley choppy and annoying the first 30 minutes, but if you kept the big picture in mind, you were comfortably short into the neckline. You can look above to see how the action played out, but at the end of the day, the target was acquired and really showed little strength the entire day. I remain short overnight with the below chart in mind. I will likely cover into the 1902 – 1908 area tomorrow as I expect that to hold at least on the first test.
This is looking remarkably similar to the action we saw to close out the month of December so I am keeping a close eye to see if it does indeed repeat itself.
The Bottom Line:
The weakness we expected played out today and at this point it appear like it may continue at least for another session (morning tomorrow). We will look to cover into the next support level at 1910 – 1900 and see if we can form a right shoulder like. Obviously we will protect profits if things don’t play out the way we expected.
Chart of the Day:
This railroad name has a price target below zero. Let’s be conservative and say it holds the 2009 lows of $5. Still a hell of a trade.