Wednesday, August 19, 2009

Technical Picture - Buying on the Dip

Bulls defended support off of a weak open leading into gap fill. Limited downside following the gap fill as prices coiled and contracted leading to expansion midday. We may attempt to fill Monday's gap before OPEX.

Crude has formed a solid base if the dollar rolls over here.

The SPY is a perfect example of coiling - NRIBs (NR7) leading to expansion. Burn the chart to memory on multiple timeframes.

TGT formed a C&H but didn't deliver the full measured move. Daily chart looks good if we can consolidate the earnings gap and try again.

9 comments:

Ted said...

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anarco said...

Hey Jamie~
I am curious about the criteria for exiting TGT. What are the key points for exiting at the point you did?
Thanks in advance.

john said...

WTF, you just post on Wednesdays now???????? :)

That trade on the SPX was an easy week's pay for anyone who wasn't a complete moron obsessed with fading the gap fill. I am an idiot.

Jamie said...

Hey Anarco,

The key points to watch for when trading chart patterns such as C&H are: price, volume, and time.

Price and volume should expand and contract in a synchronized fashion as they did on the initial TGT setup and breakout. When price tested resistance on the second attempt volume started to contract. It couldn't hold above R2 (not depicted on my chart) but a leading signal of the strength of resistance.

The last element that you might choose to incorporate in your trading is time. Technically speaking, the estimated time to reach full extension should closely match the length of time for the pattern to develop to the BO point. In the case of TGT, it took approx. 30 minutes to develop to BO point. Yet 30 minutes later it was no where near reaching full extension so that constitutes a red flag.

The time element works well on the longer timeframes, but I need to test it more on the shorter timeframes.

Jamie said...

John,

Yeah, once, twice a week until the markets inspire me to do more. Finding August to be quite the snooze fest. Plus summer has arrived, finally, so I'm mixing it up a bit.

Initially, I thought the SPY would reverse too, after all the bears had finally seized control. But as price/vol. contracted I started to lean long on a subtle pattern of higher lows.

Jim said...

Hey Jamie,

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anarco said...

Thank you Jamie for the Time element!

Jamie said...

Hey Jim,

I hate to be cynical, but this guy is attempting to hijack all the blogs so that he can get all the ad revenues. I'm going to cut him off (deny the feed), he didn't ask permission.

Jamie said...

Your welcome Anarco,

Time element works best for trading after the first hour and before the last hour of the trading session.