Text-book bears

• Posted by admin
• on June 3rd, 2012

So far the bears have been perfect in their timing.   First they smashed down the market on the test of the descending 20sma:

 

This was our chart posted last week:

The 200sma in turn turned out to be meaningless– at least intraday for Friday.   However, we expect games around this area (overshoot, trade back to 200sma, etc, similar to our call on Facebook 28 area ($FB):

The next area the bears will want to conquer is the 200sma in the leader index $QQQ  — 59.8 is the spot (note that S2 will also line up with 200sma on Monday) and we’re confident there will be decent trades around that area.  Note that it’s not uncommon for the $SPY to break major area with no reaction and then market bounce on the less crowded trade on the 200sma test of the $QQQ:

 

Thursday the market bounced on the bottom trend-line of the bear flag only to see it gap below the next day.   That’s what you call a treacherous tape.

The bears have played every card right recently — if you want to go against them wait for them to get cocky and careless (by pushing through oversold support areas) and then strike with a protective stop.    The choppier the market, the more patient our entries,  the smaller our size, and wider our stop.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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