Chairman Bernanke got the markets rocking on Friday, but and we had a great day in the room with some movers like AAPL, GLD , SINA, and PANL. The chairman’s speech was much anticipated and resulted in a very common and potentially profitable trading pattern. As a result I created the latest training video on how to trade the pattern. The video is dated 8/25 and titled “A News O.R.” I’d recommend checking it out while Friday’s action is still fresh in your memory.
The week before Labor Day typically has very light volume. However, this doesn’t always mean low volatility, so I expect there will be opportunities early in the week, but be careful of low liquidity.
The markets are wedged between resistance created by the 3 days of consolidation from 8/15-8/17 and the lows for 8/19 and 8/22. Friday’s action was an impressive recovery from a vulnerable break of two day lows and the Q’s even managed to close over the prior two days of highs, but in the end we’re left we volatile consolidation right under a very steep 20 day moving average. I don’t see a clear pattern other than a volatile short term bounce in a longer term down trend.
The Q’s are on the only one with a positive stack on the 1-day pivots and the FTP (52.52) will be just below the 52.70 area which I’d expect to be support based on prior daily highs and the last hour low on Friday. So from a bullish perspective the markets should be above their FTP, and I’d focus on the Q’s, especially if we see an OR reversal above its FTP and last hour low.
According to our rules, a negative pivot stack requires trading over R1 to be bullish. So all but the Q’s need to clear R1 to be bullish, and there is reason to trade an OR breakdown from the short side if it occurs below the FTP. If the markets do sell off look for potential support at the last hour lows, and the daily lows from 8/24 and 25.
Because Friday was a wide range day and the markets are in a wedge pattern, I would not be surprised to see the OR Reversal trades work the best, both long and short.
Long Focus
AAPL
ALXN
DLTR
HANS
GLD
SLV
CF
BIDU
ISRG
JAZZ
WYNN
RIMM
CVI
SINA
PANL
GMCR
MA
ABV
KO
ED
TJX
Short Focus
C
URBN
ADM
FXI
APA
MET
WFC
VECO
PNC
GS
