Postscript to Greek Tragedy - Epiphany

It has been a while since I wrote, but lets quickly see
what happened since, and how it played out with my
observations.

We did ultimately break the 1080-1110 support band on
the SPX, and did ultimately go down to the 1000 zone.
1010, to be precise.

We have then come back on a weak volume bounce back to
the 1080-1130 zone.

WE now have a double top in place at 1130, the 200 DMA
is just a few points overhead, and the 14-week RSI is
vacillating around the halfway point.

Here is the chart -

Greek tragedy - epiphany

This post does not describe a clearcut trade opportunity.

It is May 7 and we are in the weekend of the Greek tragedy on

Wall St. Where lies support and resistance? What to make of the

short and intermediate term pictures?

We will discuss the short term and support and resistance.

As I have pointed out above, support lies in the 1080-1110 band.

The 5 major Fib levels of the Feb - May (1044-1220) move are as follows -

1176, 1152, 1132, 1111, 1088

This also shows that the support band I drew above, which also

includes the important 200DMA, coincides with the last line

Fib retrace levels.

Lets move to the intermediate term level. I would expect the 1080

support to be ultimately broken. But before that, lets take a look

at the 5 major Fib levels for the Mar 09 - May (666-1220) -

1081, 1008, 943, 877, 804

Whoarr! the first line in the sand is, yes, 1080. And thats where the

intermediate term bullish case will rest. If 1080 holds, we retain bullish

trend on all timeframes moving forward.

But as I said above, I would expect the 1080 level to be broken.

If it is, we have a clear trade presenting itself in the not too distant

future, which should be good for a move down to the 950-1000 band.

Here is another chart, this time weekly, which explains the target

( note 1000 is a significant round number too and is just below the 2nd Fib level

at 1008 ).

I will stay out of the market right now. Anyone wanting to trade this

volatility is advised to sell way out of the money options strangles which are

fetching ridiculous premiums, but do hedge it by buying the outside strikes.

The classic 20-50 re-cross with new high

The 20/200 DMA stairstep breakout

Study the July 15 breakout of the SPX above the downtrend channel
sandwiched by the 20DMA and the 200DMA. This is the initial
signal of buy. Wait for the break above the previous top 956.23 on
June 11. Buy the large candle on July 23.

Very strong pattern. Stop at 950, adjust upwards by 25 points for
every 50 point gain. Target is 50% Fibonacci level of drop from
1576 to 666 at 1121, followed by equal move from 666 to 956 which
from recent low of 869 stands at 1159.

The weekly evening star and daily triggers - Correction

This is a correction to the stop loss point mentioned in the previous blog.
I had said the "halfway of the weekly red candle plus 50, at 4450".

When I look back at the week in question, the open was at 4583
and the close at 4313. The halfway point is 4448. A fifty cushion
gives the stop loss point at ~4500.

We are still in the trade, and profiting beautifully! In my next
posts, I will discuss the profits made on the first 2 trading
opportunities which I have presented in this blog.

The weekly evening star and daily triggers - 2

Continuing from the previous post. Look at the daily chart above.

We will see it now, at 4350 or whatever price we get on the
next open.

The stop loss will be half the big red reversal weekly candle
after the evening star doji. That is at 4400. We give it a
50 point cushion and place it at 4450.

Thus in essence we will keep a 100 point trailing stop
and hope to ride this down to wherever it ends. The first
target is the 62% Fibonacci retracement level of the
March to June advance, which resides at 3900.

Risk to reward is 5.5 to 1.

The weekly evening star and the daily triggers - 1

The evening star is a set of 3 consecutive candles as can
be seen at the 4693.20 top around the 2nd week of June 09
on the weekly chart of the nifty above. It is a strong signal
when accompanied by -

1. RSI coming down from overbought levels
2. A strong inflexion point - note the 4500 level acting
as resistance and support at various points in the past
3. A possible double top - note 4649.85 in August 2008.

As usual, what are the entry and exit points?

There is always a strong possibility that the instrument
will make one more move up for a double-top in the RSI.

We will look at the daily chart for the trading triggers
in the next post.