Back n Fill…

In Friday’s DTS we cautioned to be on alert for deeper pullbacks developing as it was the start of new Cycle which is typically weak. Scenario 2 laid odds of decline at 85% with projected price targets ranging from 1973.50 down to 1967.50, based upon average decline for Cycle Day 1…Actual Low of Day hit at 1968.00.

In overnight  trade price extended marginally lower to 1966.50…The overnight high is 1973.25 which we will mark as initial resistance. Downtrend is currently the primary direction…The gap from 7.21.14 has been filled, hence “back n fill” style consolidation with a downward skew is currently the profile structure.

Today’s hypotheses:

Scenario 1: Prior Day’s Value Area high is marked at 1974.50…Price would need to penetrate and convert this level to signal higher prices…IF converted, THEN upside projects 1977.50, which is prior day high…Odds are relatively low (34%) for conversion of prior high.

Scenario 2: IF Prior Day Low is violated and converted, THEN price projects 1964.75, 1961.75, down to 1958.50.

***Note: Odds of a Rally greater than or equal to +10 handles = 83 %…Since the current low is 1966.50…the projected 10 Handle Rule would push price to PDH at 1977.50. Average Range for Cycle Day 2 is 14.50 handles.

Trade Strategy: We’ll continue to favor short-side as long as key upside reference levels noted above are not converted. This does not preclude us from nibbling long-side with evidence of valid stronger buy response…Expectation is for some back n fill type trade with a downward skew. Focus on valid Premium and Discount Trade Setups…Keep Disciplined…ALWAYS USE STOPS!

Good Trading…David

Habitude Seven
I take the long term view. I am willing to lose in the short term. I understand that losses are a necessary cost of doing business, like inventory to a merchant. Drawdowns are viewed as temporary. I realize that my wins and winning periods are part of the broad process. Each trade is but one in a string of trades. What is happening now is one piece of a much larger puzzle. Because of this I do not get overly euphoric or despondent.

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