Thursday, November 19, 2009

Technical Picture - Technical Correction of Overbought Market

The markets are technically overextended, so a minor bounce in the dollar and some weaker than expected data, gave rise to some profit taking. Most of the selling occurred in the first hour, after which, it was a slow drift sideways as OPEX came into play.

The trendline from the 2007 highs to the May 2008 retracment as depicted on the SPY chart below, is in play ie. providing resistance.

As noted above, stocks sold off sharply in the first hour, but sort of drifted sideways thereafter. Good low risk setups were hard to find, but I did spot a nice bear flag on GS and this bearish h pattern in ESRX.

Minor setup in RIMM - Ambush play - 62% retracement of the last leg up.


Tyler said...


Great trade in ESRX! It wasn't on my list, but I sure wish it was. It was a much better mover than my trade in SNE.

Good luck Friday, hopefully not too much chop.


JTT said...

Jamie, Love your trades! You make it look so easy! I have a question for you in regards to risk management. I was also watching POT the other day for a break of 105 but didn't like the risk associated with taking the entry off of the 15min candle with a stop below that=94 cents risk. So I didn't take the trade. When price breaks such a major level like that are you buying the break of the level with a stop at the base of the 15min candle thats forming or are you dropping timeframe and managing risk off of the 5min candle? I know you like to see a candle close strong before entry. I was also watching GS for a break of the 175 level but was uncomfortable with the risk that setup gave me as well. I did enter the break of the bear flag that day but missed my original entry idea because of the confusion as to where to put my stop. If price consolidates at a major level than it's not a issue where to put my stop but if price blows thru a major level and is extended from the last consolidation what's your stop placement rules on that scenario? Thanks.

Jamie said...

Thanks Tyler.

Jamie said...

Thanks JTT,

I used your comment for a Q&A post above. Hope I clarified things for you.

JTT said...

Thank you so much Jamie:)