Finding the Low (Blue Bars)

In our prior post we were talking about the ES and that the 950 area would be a sell as that would potentially be the end of the 5th wave up. Since then the ES broke out hit the 950 area then dove 65.00 points to make a low at 885.00.

Notice how on the 30 min chart we had blue bars right at the low of 885.00 this gives us a high odds turning point in realtime so we known not to short after the blue bar prints. Notice how after the blue bars we had a upmove then turned back down to take out the lows. Since there were blue bars on that low we are not thinking the low will be taken out and actually want to look to take the next long signal on the smaller time frame.

The blue bars tell us when a big move is going to start and end in real time. Along with the levels we use to confirm our market outlook. If you have any questions or would like to see other charts please let us know. You can email us anytimne at trade@eminischool.com

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925 - 950 is the S&P range

For the last 7-8 days the ES has basically went sideways with the 950 area being a critical resistance level. Tomorrow we will be watching the 942.00 level as this could be the short term resistance level that could hold the price down on the smaller more intra-day time frames. The 925.00 level is now the support zone (the prior support was 875.00). The 30 min chart looks similiar to when we were near the 875.00 support zone before we broke higher. Even though the last 7-8 days has really been a non event, tommorrow could be the day where we finally get some movement one way or the other.

Some stocks like GS and AAPL have had some selling pressure on them the last few days. Keep an eye on these stocks as more follow through to the downside could lead the market lower, or at least keep the resistance holding the market down at this level.

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ES Inverse Head & Shoulders?

Looking at the ES on a daily chart we have the downward sloping 200 day moving average that closed today at 927.50. We are sill in the wedge on the 30 min chart and today we did not clear the 915 level again, the high that was made today was 909.00 with 910 being are upper level on the day. We are slowly making low highs on the 30 min, but those lower highs have not been confirmed by taking out any of the 30 min lows around 880.00 -875.00 area.

The daily chart looks as though we could possible be nearing the neckline of the Inverse Head & SHoulders pattern. If the market stalls out here and starts to re trace we will keep an eye on this pattern. If the pattern does hold at the shoulder line there could be great oppurtunites in the weeks ahead.

If this is the 4th wave which is corrective we still have the chance at pushing higher , but like we waid before we would be a seller of that rally. The upper level we would be looking at if the market broker higher would be the 940.00 level.

Until we break one way or the other it is hard to initiate a fresh position long at these levels. There are some individual stocks poised to make a move higher that is the only reason we still feel as though we could make one more run to new highs on this move. We are keeping a close eye on the 30 min wedge to see which way we go at this level. The 200 day moving average on the 30 min chart has flattened out today which means we should get a move one way or the other very soon.

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Watching the $133.90 level on GS

There is no doubt that GS has had a very nice move to the upside from the 11/21/08 low of $47.40 to the high that was put in place today at $145.50 , that is nearly a 300% move in six months. Can GS keep the stong momentum from this level to go another 60 points to the next major resistance level that was put in palce back on 5/02/08 at $203.00 or is it time GS will start to retreat back to the $100.00 level?

We wont know for sure until it starts to make it's move, but looking at the chart at this level the odds would seem to lean more towards correcting this 300% rally and come back down near the $100.00 level rather then extending up another 60 points from here. This will be a good indicator to the overall market holding here at 8,300 on the DOW or a move lower.

We are specifically watching a weekly close below the $133.90 level on GS. Even a daily close would trigger more selling in the stock as $133.90 would be taking out last weeks low. Today GS tested the high at $144.86 made back on 5/19/09 and buyers did NOT take out the highs with big buying pressure, we actually closed down $5.00 from the high of the day at $145.50 which was .60 cents higher than the high that was made on 5/19/09.

Maybe traders did buy the breakout but then quickly reversed there thinking and covered their longs as GS started to breakdown at the end of the day, but being that we could not take it out the highs of 5/19/09 and close above them makes us think that buyers will think twice before trying to play the breakout again if it occurs before we take out the $133.90 low.

Keep an eye on the $133.90 level on GS it might give you a heads up to which way the market is going to go if GS breaks this level before the ES breaks the 875.00 level.

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ES Short Term Resistance holding 915'

Yesterdays post we talked about the 915.00 level in the ES as short term resistance. Today the market made a high of 913.00 then dove 21.00 points to close at 892.00. We also noted that we are in a range with the low of the range being 875.00 and the higher level of the range is 930.00 and that we could bounce around between these numbers for the next few days.

The fact that 915.00 held the market down sets a short term bearish tone to the markets, and we wouldn't be suprised to see more downside action tomorrow. The 875.00 level will be a battle but if we break that support bigger funds will take note of that and probably stop themselves out of long positions.

Some of the stocks that have lead this move higher such as MON and POT got crushed today (MON) chart is looking the worst of them, but this could be a sign of profit taking as the ES can not break through the the high side of this range.

On the 60 min ES chart you can see we are making a flag type pattern and also forming a wedge, this pattern can still go one more time to the upside , but we would be a seller of that breakout if it happens. There is both time and price resistance for the rest of the week meaning: if we cant break out to new highs by the end of the week, we will most liekly start the correction that everyone is waiting for.

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ES 875 Held, What Now? +SRS update

As noted in the proir post over the weekend we were looking at the 875 area as a crucial level in the ES. This is a widely known level that everyone is talking about as it is the support level. Today we gapped lower at the open to the 878 area and that was the low of the day as buyers stepped in and took the ES up 33.oo points from the initial morning low. 

Looking at the 60 minute chart we broke through the trendline lows on 5/12 then re-tested the highs and the trendline lows on 5/19 around the 923.00 area. We are still below that low closing today at 908.75. The short term resistance is 915.00 that we could not manage to close above today. Although todays rally was impresive we are still pausing on initiating long positions at this level.  

There is a possiblitiy of breaking the 1/6/09 high at 943.00 and hit the 950 before having a major sell off, but seeing that we are in the upper range of this move swing trades long might get traders caught in the market right at the potential highs of this move.

If feels like the longs are squeezing the shorts here and it might take a little more of a move to the upside for the shorts to cover, but that is usually a great place to start looking for shorts especially if we get panic buying near the top. If we get huge volume breaking the 943.00 high we would look for a reversal in the near future off that level. 

Until then we have to acknoledge that 875.00 did hold today and we could see a battle within the 875 to the 930.00 zone for the next couple of days.

We did not get a trigger in SRS long today and looking at the chart if SRS breaks the $19.50 level  we would be looking to enter our bull call spread near the $17.80 level.

SRS ready to DOUBLE?

We are looking at SRS (UltraShort Real Estate Pro shares). SRS has made a double bottom at the $20.00 level and could be setting up for a nice swing trade long. If you are the type of trader that wants to wait for more confirmations you can look at the $26.00 level as the trigger to enter a long trade with the target being around $45.00 to $50.00 a share. 

SRS along with SKF, QID, and SDS moves fast as they are Ultra shares and can move double what the counter index the ultra share are tracking. As you can see if you look at a daily chart of SRS the high was around $300.00 a share and now we are sitting at $20.00! 

Do we think SRS can make it back to the $300.00 highs? No, we dont but SRS along with SKF look like a nice risk / reward trade sitting down here at the lows. Proir support is near the $50.00 level which is now resistance, so we would be looking for a re test of that support / resistance level in the next few months, if not sooner.

Another way to participate would be to purchase the OCT SRS $25 calls , but they are expensive at this level closing Friday at $6.10 per contract. The $50.00 OCT SRS calls closed at $2.35 if you were looking to place a bull call spread. If we were looking at doing a bull call spread we would buy the $25.00 calls then wait until SRS reached the $30.00 level to sell the $50.00 calls bringing in more premuim on the call we would be selling. Yes, doing a bull call spread limits your upside profits, but the $50.00 strike is more than 100% away from the current price of the stock. Think about that you can buy the stock and sell a call 100% away and bring in 10% on your position right now! 

In doing a bull call spread your risk would be the difference from the call you purchase $6.10 and the call you sell $2.35 for a total risk of $3.75 with a max gain around $27.00 dollars, if SRS closes above $50.00 by octobers expiration. If SRS does in fact go up to the $30.00 level and then we sell calls we could get a net credit just for participating in the trade. 

With a risk of $375.00 doing the bull call spread (at current levels) for a potential of profiting $2,700 per contract, SRS is a good stock to keep a close eye on!