Tuesday, April 3, 2012

Ending Diagonal, Ascending Triangle, Expanded Flat

The market started the correction today and tested the TA as I expected on my post yesterday. However, the direction is not yet clear as we need more waves to get a better idea. Basically, I see three options in from of us that I drew on the chart:

Red: This would be an expanded flat with the 1391 breaking as confirmation. This is the option I've been following since 1419 broke but the next options have an equal chance.

Green: This would allow for a bounce tomorrow to barely break or match the 1422 high and then turn back down and stay in the triangle. I think it's debatable on whether to treat this as a rising wedge (Ending Diagonal Triangle) or an Ascending Triangle (I include this option mainly because of the NYSE Composite). If we get the ED then 5th is almost ending. If we get the AT then we will see a 5th wave breaking out.

Blue: This would mean we gap up, break resistance and go to 1440.

Tomorrow we should get an answer.. and today I probably did my worst trading for the year. I set my stops on SDS too tight and got stopped out at break even. Then, not sure what I was thinking but I ended hedging with XIV based on a pattern. Which is a rule breaking trade for me as I don't trade on patterns alone and that error cost me not only the 2% profit I would have made with SDS but $1,050 out of pocket. Fortunately, I came to my senses after I was fully awake so the damage was not too bad. Trades logged as follows;


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