Monday, August 24, 2009

Technical Picture - Weak Close

Markets extended in early trade. The pullback after the early session move to new multi-month highs reflects weakening momentum with the long upper tail creating a weak candlestick. However, weak stick patterns have been seen several times over the last month or so with no follow through pressure. Watch for consumer confidence data at 10:00.

Initially, it was hard to know which direction POT's narrow price contraction would break. I was prepared to take the trade either way, but since this is one of my weaker WL candidates, I was satisfied with the break lower for a gap fill.


Tom T. said...

Jamie - this trade reminds me of FAS - I was not watching the market at this time of day but we have a gap up that consolidates and then fails and reverses around the same time.

GD said...

Hi Jamie,

I also traded POT early and I made some decent gain but I gave it back in the latter part of trading. Nice post on POT, I learn my mistake from your post. Thanks.

Jamie said...

Tom T.

Financials (FAS) provided leadership for the decline. Nice setup on FAS with 3 consecutive WRBs expansion.

Jamie said...


POT provided a good entry long off of the first pause (consolidation zone). When price stalls at a whole $ level, it's a good time to lock some in.

The retracement or retest did not result in a second leg up as price couldn't break the base ( blue line segment), leaving the door open for weakness on a break of the lower support zone. Initially, the consolidation was bullish with a pattern of higher lows, but then it carved out a lower high and quickly rolled over from there. Price/volume contraction leading to expansion.

GD said...

Thanks a lot Jamie. Great lesson for me. Yes, I should really pay attention with the whole $ level. This is where I bungle my position. I appreciate reply. Thanks again.

Anonymous said...

Hey Jamie,

Another nice short setup in POT today (Tues) at the 95.60 level.

Jamie said...

Hey Jim,

Yeah, similar to your CME setup yesterday, but more of an h pattern - good for full extension. That's how I traded it. Glad you caught it too.