This week the market has gone quite a nice distance, 3 points, in a week where the market was up 4 out of 5 days. As we have stated on the previous post, the sentiment still goes on and the pinpoint rebound call from 163.00 still continues.
Last week we have mentioned the around the gap that formed few weeks ago. This level - 167.30 - was an important one, especially in light of the numerous attempts of the market to reach beyond that 3 weeks resistance. Using ProTradingIndicator’s Break tool on the enables us to observe that level in a more convenient and easy way.
Actually what the market has done on sunday, is raising precisely under the 167.30, forming a , showing a strong buyers action. Half an hour later the price breakthrough has happened and the next day the price has already gapped up.
This kind of scenarios is quite common. The Break indicator tells us about a potential level of support or resistance, then we drill into a lower time frame and look into hints of that level being pierced. This time, a trained trader would put a stop order to buy above 167.30 and a stop loss order under the flags low - 167.05. The risk ratio on that trade would be 1 to 10 since the target is the gap opening. Not bad for one trade…
As for next week SPY’s levels, we have 168.30 as the previous down gap level which traditionally acts as , something which we have already seen happening this week. The next lower will be the same 167.30 level which has been talked about so much lately.
As for the closest , we have the early August high of 171.00, which also happens to be the all time high for the SPY . In regard of the late geo-political instability regarding the situation in the middle east we don’t know if the breaking of that level will be a probable occurrence...Nothing is left to chance though, we will still observe price action and act up it.
Trend Continuation - Disney (DIS)
Last week there was a rumor that Disney is going to perform a few billion dollars worth of self acquisition of its own stock in the market. This is a piece of news that could be interpreted in many versatile ways. The important element here is that for us, it doesn’t matter what the potential interpretation is, we act upon price action.
As you can clearly see on a 10 minute chart of DIS, there’s a big green candle performing a $2 move, accompanied with high . What does this tells us? we simply know that buyers have violated the market balance for a brief time and now we should get prepared for the aftershock that (almost always) comes after that kind of move.
All we have done is place ProTradingIndicators Break tool on the 10 minute chart and look for a green line where we could place a Long order beyond it. This level was around $66.30 and that’s the price we are willing to buy from. Indeed, on Friday the order did get filled and went vack a little. For now, we believe that late investors that will get to know that piece of information would also want a piece of the cake and get into the stock next week. As for now, our stop is just below the 66.25 level, on this trade we look for a 1 to 4 risk ratio.