I mentioned that my short bias would change if we confirmed a move above 1092. So what confirms a move above 1092? Well it really depends what time frame you are trading, but I will generally look at the 60 minute intra-day chart to base my analysis of an intra-day market move. So, just because we move above 1092 does not confirm that the market will continue in that direction. What I look for is a subsequent candle close higher than the first candle close above a specific level. In this case, the level is 1092. We are currently trading higher than the first candle close above 1092. This is a negative sign. If you want to jump the gun and cover your short here in anticipation that the move will be confirmed you can do that. However, until we close the current 60 minute candle above the high of the last 60 minute candle, we do not have confirmation.
I would advise against covering the short now out of fear. I would recommend patience. You can keep a cool head in this case if you think about the market in this manner and if you have this philosophy as part of your trading plan. There is no reason to get overly excited here. We have seen an exponential move higher this morning and all large moves will see a pull back. Also the fact that we broke above a key resistance level suggests that the market must retest that level. 1092 is a key level. The fact that a straight move up was necessary to touch the level and a further move was necessary to break it, it just increases the odds that the market will eventually pull back to that level. So, the fact that I am short right now at 1093 does not frighten me. I can be relaxed and hold this position.
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Just to add something here, I would like to mention that there is another significant level of resistance at 1095. We are currently seeing heavy volume as the market trades at this level. If the buyers win here, I would cover my 1093 Short because this 1095 level will become new support. The market will eventually pull back to this 1095 level, but I would rather not hold a position as a break above 1095 will provide no advantage to the shorts. Instead, I will look to enter back into my short higher up in anticipation that the market will move back down to 1095
ReplyDeleteWe have now traded back down to 1092.75. This has already given me the opportunity to get out of my position at break even. However. I like the resistance above at 1095 and the fact that the market failed to break above it. There is no reason to exit the position here when there is potential to get a nice move further down. If it up-ticks above 1095, I will probably exit the position for a loss. But right now I feel the the reward outweighs the risk.
ReplyDeleteCorrection, we only traded down to 1093, not 1092.75
ReplyDelete