Markets are made up of the people who trade them, and these people have memories of recent events. Perhaps that is why markets turn where they do. Add in a little Fibonacci and we have a few potential setups in today’s trading.
We started with a gap down, and we kept falling until we hit the bottom of yesterday’s rectangle. I tend to leave old trendlines on my charts because, like today, they often come into play later. The 7:15 bounce ran right up to the 61.8% retracement level (#1), and the Stochastic was kind enough to give us an overbought signal at the same time. Now all we need is an exit point.
Notice the difference in slope between the first drop and the second. Remember from previous posts that less momentum on a second move often means it may end at 0.618 times the length of the first move. Wasn’t it nice that this produced a double bottom, warning you to trail a close stop? (#2)
For the next few hours the market looked like it had given up for the week, but finally at 11:30 there was a rally. No clear entry there. I could make an argument for an upside TRIANGLE, but it’s not obvious enough for me to trade. Then the market remembered where it closed yesterday, and tagged it twice, to the tick (#3).
About this time I looked at the other markets I follow, and except for the NQ futures, nothing else was even approaching yesterday’s high. And there was a nice DIVERGENCE. I love it when I get two or three reasons to take a trade.