Tuesday March 29, 2016
Key Developments :
- Dovish Fed Speak Saves the market once again.
- Plan A fails, so we trade plan B
- Went out flat market indexes. No strong opinion here.
If you read last nights report, you know we came in short. The discipline trader in me covered at the overnight target so was able to protect gains and participate long. However, I am very frustrated because as you can see from the chart above, after the double bottom off the target, there really wasn’t a good price pattern to trade. I will show you what I did do in a moment, but this was pure short squeeze. I suspect many were watching the same thing we were, but did not detect the higher low risk like I did, so sat it out. The easier trade would have been to roll over and trade the H&S top, but central bankers pulled the rabbit out of the hat once again, and away we go.
At about noon, I was beginning to get skeptical that the H&S was going to play out. We still had the 5DMA sloping down in our favor, but was seeing the higher low, which we typically see in a pennant. If we were going to break down, we usually get down to that neckline. I wasn’t liking what I was seeing. I had really changed my tune from early morning. It just was not feeling like it was going to be the bears day.
It appears the market wants to try to continue higher. Note the H&S into the close that did not fire but could be present.
Let’s review the trades I did today. I did cover at the Target this morning and tried to nibble short at the 2035 level, but stopped out for small losses. I then sat tight ahead of Auntie.
I waited a bit for the market to digest the noise. I then went long around 1:45 in the minor pullback. The reason for entry was 2 fold.
1) I had the 1:07 PM low at 203.84 to trade against
2) I had the vwap from the event acting as support.
My target was the 161.8 Fib retrace of the pullback. The coincided with a gap fill as well. So I left some on the table, but that’s OK by me. I risked about .15 cents to make .85. Do the math.
The Bottom Line:
The fed endued market bubble goes on. But who cares. As you can see above, we let price lead the way, not what we “think” should happen. This will probably end badly one day, but a lower high and lower low will be made to signal a trade. Follow PRICE!