Looking ahead to Tuesday's Open (12/22/09)

Sorry to keep mentioning the pattern play, but if it ain't broke, trade it! As you saw yesterday, we got the Gap up as expected and now we are trading right at the top of the range. I have defined the top of the range at about $111.42. That doesn't mean we don't trade above that, but it has provided some steady resistance over the past month plus. So, that being said, if we Gap up above $111.42 this morning, look for a buying opportunity to get a small play towards $112. To be honest though, this is a tricky trade, unless you are experienced trading small plays like this, I would avoid it. A better odds play would be to short at $112. I'll talk more about that play if it becomes an opportunity.

S&P futures are currently trading right around the highs of yesterday, so that points us to a small Gap up to around $111.50 on the SPY. That won't give any good indication of a trade in the morning, so like I said, its probably best to just stay away. However, if we open below $111.42, look for a possible trade to the downside with a target somewhere around $110.77.