Last week ended with a whimper, but not before generating a ‘mechanical’ buy signal at 2185.75 on the intraday charts. Although no subscribers reported having done the trade, I’m going to establish a four-contract tracking position anyway just to have it on the record. Since the 2147.50 stop-loss this gambit requires implies theoretical entry risk of $1913 per contract, I’ll recommend doing the trade belatedly only if using a ‘camouflage’ or ‘counterintuitive’ set-up on the 15-minute chart or lower. There’s no rush, since, presumably, there will be myriad opportunities to get on board between here and the target at 2299.75 with far less risk. If it is achieved and partial profits are taken according to our rules at p and p2, the position would produce a total profit of $13,300. The target is significantly higher than the one at 2250 that has served as a bullish lodestar in recent weeks. I’ve used the higher target anyway because the underlying ABC pattern is a personal favorite. Specifically, although the ABC part of it happens quickly, C-D is so elongated that chartists who use ABC or Gartley 1-2-3 patterns tend to lose sight of the finish line. We, on the other hand, will see the pattern and its target confirmed if the rally stalls precisely at p (assuming the futures get there). This is a damn-the-torpedoes ‘mechanical’ trade, since my gut feeling is that the S&Ps are very vulnerable to a swoon-or-worse. Which is to say, the target is a lot more bullish than I am. But if the same set-up were to take shape on the five-minute chart, and if it entailed, say, $250 of entry risk, I’d be in love with this trade. _______ UPDATE (Dec 5, 6:50 p.m.): Offer two contracts g-t-c to close at 2223.75, the midpoint Hidden Pivot resistance of the pattern shown. If the order fills, it would lower our break-even price to 2147.75 for the two contracts that remain. We would subsequently offer a third contract at the 2261.75 ‘secondary pivot’ and swing for the fences with the last. For traders looking for a belated entry opportunity, click here and take a gander at this beautiful ‘counterintuitive’ set-up that would have done the trick on Monday. ______UPDATE (Dec 7, 1:17 p.m.): Today’s robust rally has provided an easy opportunity to sell two contracts from the tracking position for 2222.25. That leaves two contracts with an adjusted cost basis of 2149.25. That equates to a paper profit of $7250 so far.
