Relief Rally (short covering)

Monday’s “relief rally” from deep extreme oversold readings prompted bargain hunters to buy the recent weakness, to the surprise of shortie, which was forced into covering late in the day. Though the move up appeared strong on the surface, the current short-term downtrend remains intact. We have seen in past sell downs and this seems to be no different, buying on the dips.

Yesterday was Cycle Day 1 (CD1) which played out perfectly with early probe for secure low, followed by an up auction which pushed price exactly to CD1 range extreme of 23.25 handles to hit TargetMaster Breakout Target of 1937.50. We are going to mark 1933 – 37 zone as “Key Resistance Marker”

Overnight high is 1933.25 “key marker”..Price is currently down 7.50  handles as of 8 am. Today is CD2 and projected price targets have already been achieved in CD1…As such, expectation for today is for choppy back n fill type trade with a downward skew.

Average Range on CD2 = 14.54   Max Range on CD2 = 22.25

Scenario 1: IF price can penetrate and convert 1933.25, THEN there is a 60% chance of reaching 1937.50 which is Prior Day High. IF this level is converted, THEN upside projects 1939.25 – 1941.75 STATX Zone.

Scenario 2: Failure to convert 1933.25 suggests yesterday’s up move was nothing more than short covering…and “real buyers” disinterested in raising the auction. Downside price targets 1918.75 – 1920.25 initially, followed by 1912.75 – 1916.50. Key Over/under marker is Friday’s low at 1910.25.

Trade Strategy: If the auction can push back up near 1933 handle, we’ll be looking to fade that area since path of least resistance continues to be down…That does not preclude us from taking long-sided trade from lower Decision Points…As always, intra-day trading requires flexibility and willingness to play both long and short…We just want to confirm valid trade setups.

Focus on The Trading Process…Not the Outcome….ALWAYS USE STOPS!

Good Trading…David

Habitude One
I am ready to trade. My patterns are verified. My homework is complete. My mind is clear. I have rehearsed everything. I am prepared strategically, emotionally, and financially each and every day.


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