Homework for Tuesday 2008.11.25

24. November 2008
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ESZ8 - Monday we hit the 865 level and bounced off hard.  We are now settled between two major resistance/support levels (865 and 825) and on the otherside of the sloping resistance line (now support).  We are also approaching Thanksgiving, which makes trading behavior much more abnormal (think "chop time" all day).  I personally see this as a slightly bullish indicator.

The buyer's argument is we have the CCI crossing upwards through the lower level (bullish), the stochastic is pointing upwards, and Advanced GET Type 2 setup is shaping up (bullish).

The seller's argument is we have to invoke the "2 days up in a bear market" rule.  Which says that after two significant up days in a bear market, the downward trend will continue. (See video explaining this rule based on 2008.10.15 setup.  While you are at it, join Oscar's chat room and tell them "neoikon" sent ya!).  

However, it doesn't really matter.   

  • Sell 865 (be careful of res/sup at 855-857 (0.618 level of the daily fork, light gray line)), target of 825, then 796 (downward slope), then 785 (bottom of fork).  If we break 865, next major level to short is 873 area (50% area of this recent down leg and 10/22's low)
  • Buy 825 (only if we get there BEFORE 865), target of 865.  On the crazy chance we get above 865 (after bouncing off 825), look for 908.  If we close above 865 873 tomorrow, look for 908 Wednesday. 
 
 

Below is the Weekly ESZ8 chart showing the pitchfork and how we are dancing on the bottom level.  It has behaved very nicely through the whole move.
 
 
 
15:12 CST Summary - Looks like 873 was the magic number.  What gave us that?  The low of 10/22, 50% line from 1008.50 and 739 (the recent down move), and the bottom line from symmetrical triangle... all points to 773.  High of the day was 774!  That's technical analysis, baby!  The primary trade was 873 down to 825... everything else is just hoping in on the pullbacks: 865, 856, 851, etc.  All beautiful.  However, we didn't get to 825 today, instead we got to 833.50, which, in my opinion is a bounce off the lowest close we saw on 10/27 (834.75).  834.75 (we'll say 835) may be the new 825.
 
With all major sup/res areas, there was a big bounce off that 835 area.  Even though I was wrong about the 825 low, the 835 low (as mentioned above) worked well in riding all the way back up to 865 (as the homework stated).  We got to 864.25... 'eh, close enough!
 

Homework

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