Volatility can be expected to increase on wednesday and thursday, due to options expiration. Here is a chart i prepared that maybe of use in trading the rest of the week. The chart shows a neutral bias technically, in the symmetrical triangle. I think there is more than 50% chance that the week will close above my support level of last weekend analysis (1247), if the europeans dont drop a new bomb this week. If the extremes of the triangle are exceeded, consult the green and cyan areas marked in the previous blogs.
I had not prepared this chart, at the time of prior comment on long 1242. But, once i saw this chart, it was clear, why the lows had to be tested near 1238, before pushing higher. Pardon my jumping the gun, earlier :-) Headlines in europe are not happy news today, and there is good chance that NY session will test below 1238 on wednesday futures.
3 comments:
After i posted this short term chart last night, ES made 3 round trips between support and resistance lines within 12 hours. First two up/down moves were worth about 17 points and the last one about 27 points at closing hour, breaking down the support line clearly. In addition, the green support line of the previous chart, that dates back over a month has been broken during asia session. These two factors technically signal that the green zone will be breaking to the downside soon. In addition, my weekend support of 1232 has broken down, signaling next support will be only below 1224.
In terms of news, it was several pieces of bad news, out of europe, as you have seen in headlines.
With these in consideration, it was only logical to short the 1240 area premarket-europe, just recently, as a low risk entry, expecting 1224 or lower within NY session.
ES has clearly broken the triangle on es, but stopped short of breaching 50 dma. In addition, the MFI started to move up (on a daily chart). This is a discrepancy which can bring some uncertainty for the Friday session, along with OPEX.
A downward bias going into premarket europe yesterday was the right one. Today, having tested the lower supports in NY session, i think european session will test atleast 1223 area from current level of 1211 (even if decides to make another big leg down in NY for weekend risk aversion).
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