Yesterday’s Trader Vic 2B setup turned out to be at least a temporary top, but as I said, there are always three ways the market can go, and it chose sideways. But it certainly did so in an interesting manner.

The Third Direction
Two of the three darker trendlines shown were on the chart from yesterday, and are parallel. The third and forth trendlines added today are also parallel to the others. This situation happens more often than you would expect — another reason to retain old trendlines.

We gapped down past the bottom of yesterday’s channel and pulled back up to touch the broken trendline just as we hit the 50% retracement level. That would have made a nice short entry as we traced out the shape of an A-B-C pattern. I don’t have it marked as such because it didn’t stop at a normal Fibonacci level. But in addition to the Fib measurements I always mark in the Support and Resistance levels. It’s how price acts when these locations are reached that determines whether you should take action.

After reversing at 7:45 the market created a new parallel channel with an A-B-C Measured Move, with “C” being equal to “A.” And this occurred just as the entire retracement hit the 62% Fibonacci retracement level from yesterday’s high and reached the top of the new channel. And if that wasn’t enough, the top had a nice Stochastic divergence.

There have been many nice setups, but this week’s entire range has only been 15.40 points. Maybe next week the market will chose one of the other two directions.

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