Monday, January 10, 2011

Technical Picture - Bulls Defend Support

Increased volatility followed the release of the jobs data as the data was mixed: non-farm payrolls came in below consensus 103k vs. 150k; but the unemployment rate was better than expected 9.4% vs. 9.7%. The Nasdaq notched a new recovery high but the DOW and S&P failed to confirm. That was an invitation to short as depicted on the S&P emini futures chart above. Price made a fast move to support and managed a sharp retracement despite the lack of volume.

On the daily timeframe we see that last week's action carved out two hanging men sticks which foreshadow a correction. The more times we test support, the more likely it will weaken and give way.

On the $CPC chart below, we note that when call buying reaches excessively bullish levels, below 0.75, a correction is not too far behind.

Watch list names for next week CF $140.00, and MGA $60.00. Also, like AMGN after favorable patent ruling.

Also like DNDN which is getting positioned for a big move to the upside.

I will be attending a three day futures trading webinar starting tomorrow. Earnings season kicks in tomorrow with AA and APOL reporting AH.


chin said...

hi Jamie,

I entered DNDN long @38.50 yesterday but has been showing some weakness. Volume has been low too. Wondering if I should get rid of it now.


Jamie said...


How did you calculate your risk:reward going into this trade after a wide range bar? Ideally, you should have waited to see if price would stall at the blue line and consolidate in the upper range for a day or two before breaking out. This would have given a good risk: reward ratio. I said in the post that DNDN was positioning for a big move, but you don't want to jump the gun. It's much too costly. Obviously, you haven't worked on your trading plan and rules.