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Just to take the counterpoint, I would suggest that the 12/14 close below
the 1160 support (just above the the channel 3sd boundary and .382 fib
retracement noted on chart I posed a couple of days ago) combined with
further deterioration in breadth confirmed the breach of 1160 support and
makes the close above 1160 suspect. Unless today's (12/16) breadth improves
markedly, I would suggest that a reasonable short would be to short 1181
with a target of 1143. A significant improvement in breadth would nullify
this trade. This of course is what makes markets, nor is it a trading
recommendation.
Earl
-----Original Message-----
From: Bill Bancroft <bbancroft@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Wednesday, December 16, 1998 12:13 PM
Subject: S&P Support/Resistance
>Hi all-
>
>I would like to point out a practical use of support and resistance
>using the S&P 500 March 99 Contract that may end up being a conservative
>trade.
>
>First, on 11/6, the S&P hit short-term resistance at 1160. Nine days
>later, the S&P had penetrated the 1160 level on the upside. One of the
>basic tenets of technical analysis is that "Resistance becomes
>Support". On 12/3 the S&P's selloff ended at 1160.5. Resistance had
>become support.
>
>On Monday (12/14), the S&P closed below 1160, seemingly breaking
>support. Yesterday, the market opened higher and continued higher,
>taking out even Monday's high. Maybe support held after all. If so,
>that would be twice the 1160 level has held. Another basic tenet of
>T.A. is the more times a trendline or support/resistance is tested
>successfully, the more reliable it becomes.
>
>A conservative trade would be to buy the S&P if it takes out yesterday's
>high (1176.5), especially if the market retests 1160 and it holds
>again. One place to put a protective stop is below the low of either
>today or, if the market retests successfully, below the low of the
>retest day. More agressive traders could enter on a penetration of the
>high of the retest day or today, whichever is lower.
>
>It is a conservative trade because I am not trying to call the bottom
>here. If the market continues to fall, then the trade will not be
>triggered. The price action will confirm the trade. The only
>"indicator" I used in this analysis is price.
>
>I am not recommending anyone actually execute this trade, I am just
>trying to start a discussion on recent market action. I look forward to
>your comments.
>
>Bill Bancroft
>
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