Stock, Option and Futures Trading
Did you see the turning points ahead of time?
If you go back and look at the posts listed below all of these posts were posted ahead of time on this free blog. Some traders still think the market is random but if you go back and look through this blog and the bigger market updates you will see that the market is not random as long as you know what to look for and why you are looking for specific things at specific points in each pattern.
Market Update Video
11,200 support (We posted multiple posts on the 11,200)
Confirming the 11,200 with the blue bars
So we have received many emails asking what we think of the market now and what is our outlook. To make this post easy to read we will just look at where we are at on the NQ.
The NQ took out the 7/26/11 high which is bullish but there is a level at 2475 that is a very important level of resistance on the Daily Chart. The key thing is that we are saying it is a Daily Chart resistance meaning; the Weekly chart is 100% still bullish so the question right now is which time frame will be “In Play” come next week.
If the Daily chart is in play we will go down. And if the Daily resistance stays in play the daily chart will go down to the 2300 level which is 150 points.
The reason the 2475 is important is because it is the true resistance on the NQ even though we are at a new high. The 2475 is the 1.250 extension off the last leg (inverted). Why is 1.250% important? Because if you look at the high on 10/27/11 it was 1.250%.
Side Note: The DOW was 1.270% noted in the 1st video link above. 1.250 and 1.270 is basically the same.
So we would say the market is at Daily resistance and since most traders are in and out and not holding for weeks and months the outlook would be more resistance at this point. To go long here (or be long) on a swing trade basis might not be the best trading plan as of the close of Friday.
Here comes the variable:
If from this point we open very strong Monday or stay flat Monday and have a big move Tuesday the weekly chart would be kicking in and we would go up through the Daily resistance. No one can say for sure ahead of time that the weekly chart would kick in so the best plan would be to play it as resistance until proven wrong.
The word resistance does not mean short that would be counter trend so the word resistance is saying to not be super aggressive at this current level.
How will you know if the Weekly chart is kicking in? We would have multiple BIG days to the upside meaning; we would open strong and be up around 400 DOW points and we would get follow through for multiple days in the up direction.
We have pointed out good trades that we reviewed in the last post with profits of over +30 points with GLD, GS, and CDE. So at this point it would make sense to protect those profits by moving the stops up. We do not want to just exit when we have higher targets on these trades meaning; we want to give them room so if the weekly chart does kick in we are in the move. On the other side if the resistance plays out we do not want to sit through a big down turn and give up too much of our profits.
** With moving our stops we are locking in over 30 points meaning; if we get stopped the result would be +30 points.
Plus we locked in a 28% gain on the MGM long and caught AMZN calls a few times for nice gains. It is best to keep those profits and take a break from being aggressive until we see a move out of this area in either direction.
At a resistance like this it is best to lower your day trading goals and move stops on swing trades and be picky on entering option trades.