Tuesday, September 27, 2011

Technical Picture - Gap, Chop and Fade

The big moves took place during the overnight session and we were left with scraps. EOD, we have a bearish black candle which closed in the ambush zone and below the daily 20 SMA. Is this the end of the dead cat bounce? I don't know, I'm waiting for a close below the ambush zone.

As depicted on the 5 min. chart below, we gapped up wide, and chopped around a narrow range for most of the session.

As noted last week, when price is extended and choppy and we want to fade the market, we look for either

  1. A failed BO, or
  2. The 50 SMA to cross above the 20 EMA on the 5 min. timeframe (MA kisses and air kisses don't count).
We short, on a first come basis.

Today, we had a failed BO, which set up a short into the close as depicted below.

Last Tuesday (Sept. 20th) we had a 20/50 MA cross for a short into the close.

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