Tuesday, October 25, 2011

Technical Picture - Ambush

As depicted on the daily ES emini futures chart above, the bears ambushed the bulls at the cusp of the ambush zone ( 50-61.8% Fib. retracement) and carved out a reversal bar.

On the 15 minute chart below, we see that in pre-market, price printed new highs, but failed to hold, leading to failed BO and swoon back to former resistance just as the US markets opened. The first test of support was a buy and we traded half way back to the 15 min. ambush zone. This is where the algos a programmed to short once a trend is broken. This level was tested twice and the algos defended both times.

Basically, we carved out a symmetrical continuation triangle and support gave way into the close.

The short squeeze off of the Oct. 4th lows was getting long in the tooth. We were overbought and needed to correct. If the bears can push prices below last week's congestion area, we will likely trade half way back to the October lows.

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