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.
