I’ve mentioned before that I leave trendlines on my chart until they make things hard to read. I usually erase them before posting each night unless they are part of a tradable pattern. Today is an example of why they are useful.
Friday’s last small rally turned at a parallel trend channel, but the potential short occurred too late in the day. When we gapped outside the channel at the open you might think the channel has stopped working. But the market remembers.
After a sharp rally from the first bar’s low, we reversed at both the 78% retracement level and at the top of the down channel. On my 3 minute trading chart there was also a divergence with a fast oscillator as well as an A-B-C Measured Move. And that short sale was the only trade I felt comfortable with all day.
We bounced from the bottom of the channel and made a 62% pullback, but since we were inside the 1st hour’s range I was looking for multiple confirmations and didn’t find them. Once again the old channel provided a floor to the move, and eventually we made another 62% pullback to the channel top. By this time it seemed the morning range would hold. The final break came too late for me to want another trade.
Will the channel hold again tomorrow? I have no idea, but it will still be on my trading screen.
