Yesterday’s spirited leap brought the Dollar Index within 0.14 points of the 82.17 rally target I flagged here yesterday. It remains shortable, but you’ll have to choose the vehicle and interpolate the target. Since there is always the possibility the target will be exceeded, I’ll note that a close above the target would be warning bears to dive for cover.
From the monthly archives:
March 2010
A fall to at least 16.365, the target flagged in an update to yesterday’s tout, looks imminent and unavoidable. You can bottom-fish there, but the stop-loss would need to be below 16.360 to encompass an alternative ‘D’ target a tick below the one at 16.365. If you are keen on shorting the predicted decline, look for camouflage on the 5-minute (or less) chart. The futures were slightly buoyant Wednesday night, so you must trust the first bearish impulse leg that comes your way to get on board with stealth.
The pattern from which the 1073.20 target disseminated yesterday was derived looks too pretty not to play out as drawn (see inset). You can bottom-fish aggressively, and this time I’ll leave the stop-loss up to you. It can be as tight as 4-6 ticks. If the target gets bombed, we’ll need to consider the 1044.50 structural low — early February’s bottom — as a minimum downside objective.
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In the absence of even a speck of buying interest, the 1175.75 rally target is still the most compelling choice we’ve got. Short there with an 1177.25 stop-loss — a pittance if you were on board for the nearly $2800 ride we got from Monday’s 1146.75 low. Alternatively, the futures would need to fall to 1157.25 today to turn the (very) lesser charts bearish.
Let’s add the Dow Industrials to the list of major stock indices that we would like to short. This can be done using a midpoint pivot of 111.50 from the weekly Diamonds chart. We recommend selling at 111.37 with a stop at 111.77, risking $40 per 100 shares traded. The equivalent of the pivot in the June Dow futures contract is estimated to be 11087. (Posted by Doug McLagan) ________ UPDATE (2:40 a.m. EST, March 31): In reconsidering the risk/reward characteristics of this trade, we have decided to cancel the recommendation. Should the target be reached, however, traders should be alert to hidden pivot-based opportunities to get short if a reversal there appears to be underway. For the Dow Jones Industrial Average, the midpoint is at 11156.44.
| 11156.440 |
The corrective pullback missed my minimum target by a few hundredths of a point, but we shouldn’t let that deter us from acknowledging the power and potential of the thrust that appears to be under way. Just one small change is warranted: My initial rally target was 82.09, but I have raised it to 82.17. Shorts can use that number aggressively, but you’ll need to interpolate it to fit your vehicle of choice.
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On the 3-minute chart, the corrective pattern from Tuesday’s high, 17.150, looks like it could find tradable support at exactly 16.860. The abc coordinates are delicate enough that I’ll recommend using a stop-loss no wider than four ticks off a 16.865 bid. If the order fills you’ll be on your own, but you should try to take at least a small profit early on if it comes available. _____ UPDATE: Silver took a three-cent bounce from within a tick of the Hidden Pivot support noted above, so traders who bought on the way down could have booked a nice profit on a day when sellers prevailed. The new downside target is 16.365, a Hidden Pivot support we can use as a minimum projection for now.
Consider the Odds Before Buying Puts
by Rick Ackerman on March 25, 2010 2:27 am GMT · 3 comments
We exited a bullish position in the E-Mini S&P yesterday on a trailing stop, expecting to reverse our strategy and get short at a slightly higher price. The futures need only have tacked five points onto Tuesday’s highs to trigger the new trade; alas they spent all of Wednesday going nowhere as we sat on our thumbs, bored half to death. The charts suggest the market is tied up in knots — and what’s a trader to do? We are given to infer once again that there is virtually no buying interest right now other than from bears covering shorts; moreover, when demand from that source is absent, stocks cannot make even an inch of headway to the upside. Just as obviously, there is no selling power whatsoever, and any » Read the full article