Homework for Thursday 2009.04.16

15. April 2009
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Hopefully this won't be too confusing, but I find this very interesting!  As mentioned in yesterday's homework, the bullish entry was from the 50%-61.8% pullback area (831.75-825).  Wednesday's low was 831.50(!) and had a 20 points rally right up to the cross of the 0.618 pullback (short, 850) and the descending trendline (light grey line).  See chart below.  If we do fall from here, the target is at the -0.236 level (824.50), which overlaps the 0.618 level from the original long.  Amazing!  This tells me that even if we pullback from here, higher highs are still possible, as long as that 825 area holds.

 

Below is the same 120 min chart, showing a perfect 1.272 fib extension from the last rally in this pullback.  This tells us that this little rally may be done.

 
UPDATE!  Now that 6 hours passed since this original post, there was a strange pop in market action.  We popped right to the 1.618 level (to the tick!) and fell back below the descending trend line.  My bearish stance stays unchanged, unless this trendline fails.
 
 
 
 
So for Thursday, I would like to see us pullback from this 850 level down to 825. If the overnight data shows us rallying above the current 850 area, then I am bullish and looking for 875 (as the first chart above shows).

 
 
Just to be prepared, if we continue down, there is another long setup at the 843.50-840.75 area, prior to the 824 target.  The target of this move just happens to be at the same level as the previous highs.
 

Homework

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