Tuesday, May 03, 2011

Technical Picture - Correction In Play

After breaking out of a bearish rising wedge, the SPY corrected to the first minor support level and bounced in the last hour to trim today's decline. The Nasdaq corrected more sharply on higher volume resulting in a distribution day. Most technicians expect a retest of SPX 1340 (former resistance) to come into play.


The SMH retested resistance and is now pulling back on light volume which is constructive. Bullish gap support might be tested.



Th parabolic SAR sell signal for silver ishares triggered yesterday as depicted on the chart above. High volume selling over last two sessions.


The beaten down $USD is forming a tiny base. This could lead to an oversold technical bounce and move back towards the downsloping trendline.

Today's Trades

When I logged into my broker account this morning, there was a bulletin advising of an increase in margin requirements for silver derivatives. This was a good clue that SLV could be under pressure again today.


CTSH was a failed BO yesterday, and today's gap down and breach of support, set up a good shorting opp.

The best part of the CTSH trade was the reversal long after price formed a perfect, low risk handle on the 1 minute chart below.

At the EOD price broke back above resistance. I'll be watching tomorrow to see if CTSH forms a bullish inverse H&S bottom.

ARMH, another failed BO from yesterday, set up a short on break of well defined support. Took a partial at gap support, but eventually it failed. Covered balance as price approached complete gap fill. Not much of a bounce after such a big move.

4 comments:

john said...

Brilliant trades n armh and ctsh.

James said...

Jamie,

When debating on what setups you want to use, do you focus on the ones that are low in risk or ones that have the greatest potential to move?

I find that sometimes these two aren't necessarily the same, so I am curious on your thoughts regarding your setup choices.

Jamie said...

Thx John!

Jamie said...

James,

I like low risk entries because I find that price/volume contraction or coiling within an orderly setup usually leads to price/volume expansion. However, sometimes the best opportunities come in the form of reversals and these are generally not low risk. Under these conditions, I usually move to a lower timeframe and try to define a reasonable risk level within the context of a bigger move. The only other way is scale in, but that is harder to do.