DAILY MARKET RECAP
Monday December 23, 2015
Key Data points:
Key Developments :
- Pre-Santa Clause Rally continues
- Massive bounce in oil and strength overseas pulls market higher
- Bullish Inverse H&S forms on the 30 minute timeframe.
Today was just a pure gap and go. If your strategy is to trade some type of moving average momentum, you probably made money today. However around here we focus purely on price patterns that improve our odds and give us very well defined entries and exits. Gap and go’s with no technical foundation are difficult to trade in my opinion due to the trading risk. Hindsight says this was a very easy trade. However, there was not enough technical foundation, to define today’s move, so we stayed out. I said last night I would not chase a gap, and I stuck to the plan. The next trade within our strategy will show up, and we will execute. Today was not one of those days. Clearly there were more buyers than sellers, but that does not mean we necessarily have to be in the market. Just look at the chart. If you bought in, where was your stop? A good stop was too far below the potential target in our opinion, so no harm no foul. Staying out of the market when you don’t have clear edge is one of the hardest things any trader needs to learn. I have learned that, which is why, I did not chase.
***UPDATED Looking closer at the action here after the close, this looks like cup/handle. This was very difficult today, but we can now use this as a support on any pull back. The target would be at 2080, so keep that in mind.
possible this is/was a cup/handle after the inverse target acquisition.
I did one trade today, and it was counter trend and made a tiny bit. Around midday, we saw the development of a H&S. I was able to short the restest of the neckline and rode it into its 2057.80 target. We can then see the formation of an upside down Cup/Handle. However, the breakdown failed to acquire target and took out the cup high, so I bailed. There was a little money made, with well defined risk. Some days they play out and some days they don’t.
So where do we go from here? Again, wait and see. We have the bullish double bottom cup/handle targeting 2169 still at our back. Additionally, on the 30 minute time frame, it is possible we are seeing another larger sideways inverse H&S. A move above 2076.71 is our the first goal here. I will watch this pattern closely.
For those looking for a bottom in oil, you got some bullish price action today. That does not mean 100% this is the bottom, but if you continue to trade the price action you will be positioned to make money The sideways inverse head and shoulders, fired and acquired it’s 11.25 target today. Keep that in mind as it forms a cup/handle below 11.25 to see if it can move up and test the next swing high around $12.
The Bottom Line:
Today was a nice follow through leading into the last trading day before Christmas. In my opinion there was not much of a technical base to justify today’s move, however we must watch the potential inverse H&S developing on the 30 minute chart. It is not only important it break out, but that it move above 2076 and 2013 to give us more confidence in this pattern. It is also a good idea to be prepared for a failed breakout development given what we have seen the rest of 2015. The volume is thin. There is no need to press trades during this light volume environment, It only leads to frustration and losses. If the technicals align as they have most of this month, there will be trades, but be patient and don’t chase moves without technical foundation.
Chart of the Day:
Watch this one. It has a cup/handle pattern in motion and is consolidating sideways. Let’s see if it can continue above this tight trading range to its 163.19 technical target.