Thursday, August 16, 2007

Plan for the dead cat Friday, Aug 17, 2007

The dead cat showed up today.

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No more chasing, I will sit through the whole day without trading if necessary if my setups are not there.

Based purely on what happened on Aug 1/07 (the same patterns repeat, even though there are different reasons each time), here's what I think ***might*** happen for tomorrow.

The 40pt monster that we had in the last hour of today's session will be tested. So we will open with with some spillover buying from today, run-up to some resistance level, reverse and start heading back down to test today's rally. Then we chop 'n slosh (if you can call 20pt swings "chopping around"), and somehow wind up +ve for the day.

So that was the entertaining part. Now the hard part is to figure out how I'm going to play tomorrow.
I'm going to keep it simple, real blood simple. I think the 40pt rally that we saw in the last hr of today will get tested. So my only play for the morning is to go short after the market breaks the buying that will occur to open tomorrow's session and heads down to re-test the rally. Of course, if we get a huge gap up to open tomorrow that doesn't fill, then all bets are off.
Resistance at 1430-1435, and 1442-1446.

Since I think the market will wind up +ve for the day, then I will look to go long sometime in the afternoon.
Support at 1405-1415. There's a bit of a no man's land between 1430 and 1410, where it's not clear who has control, the bulls or the bears. Probably by lunch hour we should have a better idea of where the market wants to go. In any case, I will only enter long after a shallow pullback (ie. 38.6% retrace or less) off a confirmed bottom (like a double bottom) and break of down trend.

Patience will be the key, and I will need all the patience I have within me to follow the plan.

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