When a market trades like the way this one is, where it consolidated above the and broke out to new highs, it looks like an easy trade after the fact. What you don't see is the amount of risk if the trade does not work out. As I wrote in a previous report, price needs to either retrace to the relevant support (now 591) or push into the which it has.
Environments like this, that are trending but carry a lot of risk on larger time frames are better suited for day trading. The reason is time. If you took the breakout above the 700 level, if it faked out, since you are day trading, you can get out immediately for a small loss. If the trade works out, you capture some of the move, and then have the option to hold it longer once you have a nice cushion to play with. Working with smaller time frames, you will have more signals and conditions to consider that can provide a level of nimbleness that is not within the scope of a swing trade.
With this being said, I am not looking at this market from a day trading perspective, only the swing trading perspective which means I must stick to my swing trade rules and criteria no matter how enticing a market looks. The 741 to 845 is the .618 of the recent structure. From a swing trade perspective, it is not an area to buy, it is an area to consider selling or locking in profits if you are long from lower prices. This is where the reactionary herd of buyers pile in and offer a nice liquidity spike to unload inventory into.
The 764 resistance is the .382 of the entire structure relative to the 1420 high. Price has not cleared it dramatically, so there is still a high probability that this market falls out of this zone. If the market does sell, the 591 support (.382 of current swing) is the level to watch for the much more attractive reward/risk swing trade long.
In summary, as I wrote earlier in today's S.C. report, patience is essential during times like this. Do not let your greed get the best of you. No market goes in one direction forever. It will retrace at some point, and that is when we can evaluate the next swing trade opportunity. As this market continues to unfold, we will be posting updates and signals (if the market cooperates) on S.C. only.
Questions and comments welcome.
Again, if you’re a long term investor, then keep that in mind. You will lose hair (and money) if you get all worried about these swings and try and start becoming a day trader to get out of (temporary) loss.
If you’re not a day trader, then don’t try to day trade. So many people think that because they know how to place an order that they’re a master trader all of the sudden. Nothing wrong with following these charts and learning - that’s great. They’re interesting and they’re educational. But if you’re a beginner, don’t delude yourself that you’re some guru because you have an exchange account and know what a head and shoulders pattern is. You’ll get eaten alive.
Now I sit at the feet of the master with calm and patience waiting for him to speak his, no doubt hard-earned, wisdom.