Focus List 8/26 - Nice consolidation. Tomorrow Anything Goes

Geoff Bysshe | August 26, 2011

We're about to begin the last week in August which is usually one of the thinnest trading periods of the year. Add to that the fact that tomorrow is a Friday and I'd plan on a very thin trading day. The much anticipated speech by Chairman Bernanke, could easily may create volatility, but it's not likely to create a great trading environment.  So tomorrow is a day to be patient, only take very good set ups.

I might even be inclined to say any 5-min OR break that is on the short list and lines up with today's low would be my favorite trade anticipating that I'd take profits at 10:00. Look at URBN today for an example of what I mean.

I've attached a chart of the SPY's which is very representative  of all 4 market watch charts - SPY, QQQ, IWM, and DIA. I've used the 60-min. chart only because it displays more granularity of data than the daily. Here are the key points of consideration.

• Today's highs completely fill the gap from last week and sit right where you'd expect the market to stop - in the daily consolidation of the last daily swing high, and the 20 -day moving average (not shown on the chart). This is likely to be resistance again.
• Today's low sits right at a 50 % retracement of the move from the lows of 8/22.  This is enough of a retracement to set up a nice move back up, but a move beyond 50% is often a sign that the lows should be the target.
• The lows of today sit right on a zone of support defined by the h by the highs 8/18, 8/19, 8/23 and the low of yesterday (8/24). That makes 4 of the last 5 days for anyone counting! Today's low is a key inflection point.
• Tomorrow (8/26), the 3-day pivot low will be at today's daily low. Again, today's low will be a key level.
• The one day pivots will be slightly stacked negatively and the 1-day pivot ranges are very much overlapping indicating consolidation.
• Tomorrow's FTP lines up with the high of the intra-day consolidation so it is likely to be a significant inflection point (117.30).

Add it all up and I see 4 key levels to trade off. Today's low (115.87). The FTP (117.30). Yesterday's high (118.25) and today's high (119.40).

There is a good chance that many of the stocks you're looking at will have similar patterns and confluent reference points. Check them out.

As a general rule the FTP will be the line in the sand between bullish and bearish and I'd be more bearish below today's low and the 5-min OR low.

Long Focus
GLD
SLV
TLT
MA
ABV
CF
CVI
AAPL
SINA
BIDU
IBM
BIIB
ISRG
RIMM
HANS

Short Focus
OPEN
ADM
FXI
LVS
VRSN
HAL
OXY
RAX
SLG

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