Monday, January 27, 2014

50 DMA Challenge?

The market sold off a bit more today but found bottom at 1772, which basically forms the neckline for the potential Head and Shoulders I posted about on Friday.  So far the bounce looks like it might be headed towards the 50 DMA but we must see a W3 tomorrow or a C wave to challenge this very important trend at 1813. If we apply 1.618 to the coming bullish wave then we would get 1814 as a target assuming the 1781 W2/B low.  However, if this turns out to be a 5 count then the target will be 1825, which will be a test of the Trend Average. Another possibility is further downside tomorrow with today's high being a W4 but I lean towards the counter rally.

I executed my trading plan and bought XIV as the market got close to the 1768 target I had in mind. I closed the position at 1790 (11/11) with a very nice profit but then I decided to double down on my profits by getting back in towards the end of the session. So I will double what I made today if I am right on the W3/C or likely lose all my profits from today by setting the stop at today's low. I normally like to take some profits just to be safe but I guess I'm enjoying the adrenaline One thing I do know is that what started the selling was an excuse to sell not really a change in fundamentals. So should the market tank, specially Chinese shares, I will be buying more of them with some of the cash I've raised in the last year.. to me this is a no brainer.

Short Term Trend = Bearish
Medium Term Trend = Bullish
Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors. 

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