On the previous week we saw a nice upward movement of the market, a gain of about 2 points.
Although that week’s price action is green, drilling into a lower time frame (5-10 minutes), we can see the struggle that has happened throughout the week - deep and continuous pullbacks immediately when a new high is reached. This behaviour tells us that although buyers are stronger, they are still lacking the confidence on a real rally, and therefore, any signs should be analyzed with extra criticism.
As for important technical levels to look at, we still have the 167.40 resistance from the gap down of Aug 15. This level is extra important since it comes in tandem with the Low Break signal of the DIG Break indicator from ProTradingIndicator (An indicator package available from the top down Indicators menu). The opening of the gap below that signal level amplifies its importance. Now that prices are getting closer and closer to that level, observing the chart at the last time we’ve tested that price level (About a week ago), it can be seen that prices quickly gapped down the next day, so again, extra caution is advised - especially for traders with a natural tendency…
As for support levels, we have the nearby 164.50, which became a clear spot for a potential bouncing, but the most important one is 163, the level from which we bounced of last week.
This level, besides from forming a , sits on an positively sloped which acted as support each time price has come close to it, from the beginning of the year. Breaking that level will certainly reshuffle the cards and sentiment will be revised.
Gold and Metals.
As for gold ( GLD ), we’ve seen a slight pullback from the previous week’s highs, considering the long distance gold has experienced the last two months, it is welcome. This pullback didn’t occur without any reason, that move has started exactly on 137.50 level where we had already July’s high .
Regarding technical parameters, we don’t see any change in what we have already seen before, prices push high on high and push back on low . Prices are still contained in the positively sloped , and until we see a break, we are still on gold .
As for silver ( SLV ), although earlier this year the were not so correlated as before, now we can see the correlation coming back and silver’s story is about the same as gold , still .
Facebook continues rally.
It seems like this stock has no desire whatsoever to catch its breath and take a pause from the current, outstanding rally starting from $34 gap. This is particularly great news for our position in FB since day 2 of the gap, taking a Long position out of a “Continuation trade” strategy.
This strategy aims to catch stocks that have already experienced violent moves, up or down, which are on the verge of a second significant move.
For example, on day one where FB gapped up to $34, we waited for DIG Break indicator to show us a green line, indicating a possible Long position above that line (This indicator is part of ProTradingIndicator’s package available on the Indicators button). Once the Long position was live, we put a trailing stop loss below the previous 1-2 low . This technique has worked immensely good on this position and on many others.
As traders, we have always to be alert on economic news goin out. Trading while big news should come out brings the chances of any trade to a simple 50-50 chance. We don’t know what the numbers will be, and even if we know, the market doesn’t always behaves the way we thought it should.
Here are the important economic news for the next week:
Wholesale Inventories, Sep 11 @ 10:00 AM.
Retail Sales, Sep 13 @ 8:30 AM.
PPI, Sep 13 @ 8:30 AM.