Traders' Library Blog

Starwood Hotels is Ready to Move

Starwood Hotels & Resorts (HOT) is testing significant resistance, and could be on the verge of a major move ahead. Here's why…

Resistance at $61

The daily chart shows HOT is currently testing a significant area of resistance at the $61 level. As a matter of fact, this level has been resistance for two years, and every test at this level has led to several stern rejections.

In 2012, the average move away from the $61 level was 20%, so we could be on the verge of a similar move very soon.

Also, it's interesting to note that the monthly R2 Floor Pivot sits right at $61.12, providing a solid confluence of resistance. Clearly, a breakout or reversal away from this level could lead to some exciting price action.

Compression

Over the last two years, every reversal away from the $61 level has been swift and sharp, similar to v-bottom reversals.

However, this is not the case this time around, as HOT has been trading within a highly compressed trading range below $61 for the last 15 sessions. In my opinion, this compression could signal an even bigger move ahead, regardless of direction.

The Range Ratio indicator shows the average 15-day price range is significantly smaller than usual, as evidenced by two consecutive readings below 0.75. Readings below 0.75 usually signal impending breakouts, so watch the outer boundaries of the 15-day trading range for a confirmed move.

For reference, I've marked similar ranges from the last few months that have yielded great results.

The Game Plan

Thursday's bearish Outside Day reversal candlestick pattern hints at a sell-off ahead. However, a break back below the monthly R1 pivot and through the bottom of the 15-day range at $58.95 will confirm selling pressure. Here are the bear targets to watch: $56, $54, and $52.

On the bull side, watch $61.15 for signs of strength. A break beyond this level could spark initiative buying participation, which could pave the way for big strength ahead. Here are the bull targets to watch: $64.50, $65.50, and $66.35.

Keep in mind, price will likely continue to build out within the boundaries of the tight range until a decisive breakout occurs. Be patient, and ready.

Let's see how this one plays out!

The Complete Swing Trading Course

Don't forget, Friday is the last day to order the 3-disc DVD set of The Complete Swing Trading Course, with the chance of receiving two additional live educational trading webinars that complement the training.

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Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

E-Mini NASDAQ Poised for a Breakout

After a few weeks of range bound activity, the E-Mini NASDAQ 100 seems poised for a major breakout opportunity. Here's why…

Major Compression

The daily chart shows the E-Mini NASDAQ 100 is trading within the boundaries of a highly compressed price range.

As it turns out, this price range actually encompasses the year's trading thus far. The fact that markets ebb and flow between compression and expansion phases, leads me to believe we'll likely see a breakout from this trading range soon.

As a matter of fact, the Range Ratio calculation shows the current average 10-day price range is vastly tighter than normal (a reading below 0.75), which is usually a precursor to explosive breakouts and range expansion.

Furthermore, the NQ has formed an Inside Day pattern, whereby the last day's price range fell within the price range of the preceding session. This pattern usually leads to breakout opportunities, as well.

Targets to Watch

Regardless of direction, a breakout should yield solid results. As a matter of fact, I'm estimating that a move of around 98.25 points could be seen over the upcoming 10 days.

You see, the current average 10-day price range is 78.50 points. When price breaks free from highly compressed ranges, it tends to move a distance of about 125% of the current average multi-day range (78.50 x 1.25 = 98.25). Of course, this is just a Rule of Thumb, but you'd be surprised how accurate this calculation can be.

With resistance being 2,752, and support being 2,700, we're looking at 10-day targets of 2,850.25 for Bulls and 2,601.75 for Bears. Guess what? The monthly R2 Floor Pivot is sitting at 2,852.25, and the monthly S1 pivot is 2,586.25, which are very close to the MDR calculations above.

Keep in mind, the NQ may continue to churn slowly within the trading range over the next few days. However, once the market sees a worthy catalyst, look for a potentially big breakout opportunity to occur.

Read more here...

S&P 500 2013 Outlook: Massive Correction Ahead?

Here's my 2013 market outlook for the S&P 500, wherein I discuss medium and long term analysis, and reveal why I believe it's time to begin preparing for a potentially large correction ahead. Read More…

Medium Term Outlook

I can't help but feel a little deja vu when I see the daily chart of the S&P 500 cash index. You see, the index has gotten a very nice bullish start to the year by breaking through the top of the clearly-defined triangle pattern, which developed over the course of the last four months of 2012.

As it turns out, the index started the 2012 year in much the same way, but the triangle pattern was quite a bit larger than the current version. I wrote about the 2012 triangle last year (HERE), and my analysis was fairly on point.

This time around feels similar, only I believe we're at the tail end of a very decent 4-year bull trend. More on this later.

The daily chart shows the $SPX got a clean breakout through the upper line of the triangle on the first trading day of 2013 (just like last year). So far, prices have held fairly decently just 9 trading days into the new year.

Since the backend of the triangle measures about 130 points, I'll be looking for the $SPX to approach a target of about 1,545 within the next three months, with an outside chance of reaching as high as 1,580.

Keep in mind, the S&P is currently testing a very important wall of resistance at 1,475, which also corresponds to the monthly R2 Floor pivot. If the index cannot rise beyond this level soon, we could be looking at a near-term sell-off that could spark a test of the monthly pivot range at around 1,425.

Watch 1,475 and 1,450 for short term directional conviction.

Long Term Outlook

While the triangle in the daily chart indicates short to medium term strength ahead, I'm afraid the weekly chart is giving off vibes of stalling, or perhaps worse.

Take a look at the weekly chart, and the five arrows I've drawn. The big rebound of 2009 shows a very bullish wave of price movement from the 666 bottom, complete with a nice steep slop.

The second arrow shows another wave of nice strength, but the move fell short of the distance covered during the first wave of the bull trend.

The third, fourth, and fifth waves of strength all covered vastly less distance, with each new high being relatively lower than its predecessors.

What does this tell me? The market is showing signs of exhaustion, or stalling. While the market has rallied strong for four straight years, the current price structure of the trend indicates we could be due for quite a correction ahead - one that could lead to a 20%-plus decline.

Watch 1,340

While there is no imminent sell-off danger, we'll want to keep a very close eye on 1,340, as a violation of this level could be the spark that starts a major correction. Not only would breaking 1,340 represent a break through the most recent long term higher low, but it would also be a confirmed break through the yearly pivot range (pink lines), which oftentimes spells more selling ahead.

If, or when, the time comes and a break through 1,340 occurs, look for price to test each of the first two yearly pivot levels at S1 and S2, 1,299 and 1,171 respectively, with an outside shot to reach S3 at 1,083.

Within the longer term context of this index, 1,100 should continue to hold as long term support, and could represent a very solid buying opportunity for the next major wave of strength.

In terms of timing, look for the index to remain short term bullish out of the recent daily chart triangle for the next few months. Pay attention to the month of May very closely for signs of weakness, as the well known axiom "sell in May, and go away" could be the catalyst that leads to the larger correction we've just discussed.

What are your thoughts on this analysis? Tell me what you think in the comments section below!

I'm looking forward to seeing how this one plays out!

NEW Swing Trading Course!

Just a heads up, due to popular demand I'm currently putting the final touches on a fantastic swing trading course. I'll be formally announcing the course later this week, so keep your eyes and ears peeled.

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

LMT Bullish Gartley Pattern

A Bullish Gartley Pattern recently completed on Lockheed Martin Corp (LMT on NYSE.) The XA leg of the Gartley pattern indicates the direction of the trend and the AB=CD symmetry indicates the completion of a correction against the trend. The intent is to identify the completion of the correction at the projected D point and then to open trading positions in the direction of the trend. The trade setup was complete on December 14th, 2012 when LMT traded at 89.38 at the 1.1 line. At this point we would be looking to buy one tick above the high of the most recent low bar.   

On December 18th, our stop order to buy was hit and LMT quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out our free introductory video course at at www.geometrictrading.com 

 

 

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FMC Bullish Gartley Pattern

FMC Bullish Gartley Pattern

A Bullish Gartley Pattern recently completed on FMC Corp (FMC on NYSE.) The XA leg of the Gartley pattern indicates the direction of the trend and the AB=CD symmetry indicates the completion of a correction against the trend. The trade setup was complete on November 15th, 2012 when FMC traded at 51.20. At this point we would be looking to buy one tick above the high of the November 15th low bar

On November 16th, our stop order to buy was hit and FMC quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out our free introductory video course at at www.geometrictrading.com

 

 

Sell Resistance in this E-Mini

The E-Mini S&P 400 was rejected at stern resistance for the second consecutive session today, which forecasts additional selling pressure ahead. Here's why..

Strong Resistance

The daily chart of the E-Mini S&P 400 shows price was firmly rejected at the 1,005 resistance level today, leaving a very bearish wick above resistance before closing near two-day lows.

As a matter of fact, the daily bar candle formation that developed as a result of today's trading was the engulfing (or outside day) candlestick, which tends to pinpoint key reversal points in the charts.

The fact that this candle formation occurred at this resistance level is indicative of a potential multi-day decline ahead. It's also not a coincidence that each major E-Mini also formed this highly bearish candlestick.

The 1,005 resistance level has been in play since late September, but also dates back to the March to May highs, as well. Therefore, this "line in the sand" is one to continue to watch.

Unchanged Value Setup

The 15-minute chart shows the EMD has also formed an Unchanged Value relationship. I don't often mention this relationship, but I do introduce the setup in my book Secrets of a Pivot Boss.

Basically, this relationship develops when the upcoming day's value area is virtually unchanged from the prior session's value area. This relationship indicates that current value is holding steady and that buyers and sellers are happy with current value.

However, this pattern also forecasts a potential breakout opportunity ahead, since market participants will eventually seek to push price to new value. That is, the market is happy with current value, but this phase won't last long and will usually lead to a breakout opportunity.

Like the Inside Value relationship, we'll want to see if price can open Tuesday's session with a gap out of range and value. If a gap does indeed occur, and the market maintains the integrity of the gap after the first 15 minutes, we could see a nice unidirectional trend day in the first two hours of the sessions.

Bear Targets

The current average 5-day range is 35.2 points. If we assume that Monday's high price of 1007.6 remains as the high, we can subtract the 35.2 MDR from the high to get a forecasted 5-day range that spans from 972.4 to 1007.6.

Furthermore, we can subtract 75% of the 35.2 MDR from the 1007.6 high to forecast a much higher probability target, which in this case is 981.2. As is turns out, this target has a 70% chance of being reached.

If the EMD opens the session with a violation through three-day lows at 992.20, then look for price to drop back toward the 981.2 level by the end of the week, or sooner.

Also, look to scale out of your position at the nearest VPOC (Virgin Point of Control) at 988.3.

Let's see how this one plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Game Plan for the E-Mini NASDAQ 100

The E-Mini NASDAQ 100 got an impressive breakout in Thursday's market, and broke free from the downtrending channel. Yesterday's breakout could mean more strength Friday.

Higher Value Setup

The 5-minute chart shows the NQ has developed a Higher Value relationship after yesterday's rally. As you know, the HV relationship develops when the upcoming day's Value Area is projected to be completely higher than the preceding day's VA.

Essentially, this means buyers were successfully able to establish higher value, which is quite bullish considering value had been diminishing during the downtrending channel.

Look for the market to retest the newly minted value area during the early part of Friday's market. If responsive buyers are able to defend the value area between 2,673.50 and 2,683.25, then look to buy the pull-back ahead of the likely upswing.

The Game Plan

If the market opens the session above today's projected Value Area High at 2,683.25, then I will be looking to buy anywhere within the value area between 2,673.50 and 2,683.25. I'll be watching 2,713.25 as the main target, and 2,724 as the flyer.

If the market opens within the value area, I'll be more cautious with the entry, and will look to buy as low as 2,673.25, with the same bull targets.

If the NQ opens with a gap down below 2,670, I'll look to establish a Short position between 2,673.25 and 2,678.50, as this scenario will indicate that market sentiment has completely changed. The bear targets are 2,656.50, 2,645.75, and 2,638.75.

Keep in mind, while today's main Game Plan is to buy the NQ, this is only a one-day trade. The NQ remains within a very sharp downtrend, which began in mid-September, and the current advance could merely be a rip within the current decline. Either way, there's still more short-term upside above 2,700.

Let's see how this plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Big Move Expected for the E-Mini S&P 400

The E-Mini S&P 400 futures contract (EMDZ2) closed Thursday's session within the boundaries of a two-day range that could be the catalyst for the next major breakout opportunity. Here's more…

Inside Value Setup

The 15-minute chart shows the EMD has formed an Inside Value relationship for Friday's market, which tends to forecast great momentum opportunities. You'll notice the developing value area indicator (dotted lines) both closed within the value area (blue lines) from Thursday's session, which essentially illustrate that price is coiling up ahead of a breakout.

Resistance at 1,000

The 60-minute chart shows the two-day range has formed precisely at resistance at 1,000, which is a level that has had a lot of play over the last two months. Since September, the E-Mini 400 has traded above and below 1,000, making it a clear fulcrum between bulls and bears.

In essence, a breakout in either direction from the Inside Value pattern should spark big movement. However, given Thursday's late-day price behavior, a downside break is most likely to occur at this time.

Additionally, the EMD has held below the monthly H3 Camarilla pivot all month long, which sits at 1,004. Any downside move away from this level could spark a serious move.

The Game Plan

Ideally, we'll want to see price open the RTH session outside of the prior day's price range. Therefore, we'll look to enter Shorts should price open the day below 994.5. I won't be picky, though, as an open below 996 should work just fine. Since the current 10-day ADR value is 11.3, we'll look to play to the following targets: 990.3, 987.5, and 984.7.

If price opens the session with a gap above 1,002, we'll want to be long with targets at 1,005 and 1,008. If price opens between 996 and 1,000, we'll sit on our hands for now.

Don't forget, if you buy my book Secrets of a Pivot Boss in the month of October, you'll receive a free live webinar in November! Click for Details.

Let's see how this one plays out!

Cheers!

Frank Ochoa PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

RIMM is Ready to Move

Research In Motion, Ltd. (RIMM) has been moving lower within a severe downtrend as of late, paving the way for several "sell the rip" opportunities. However, RIMM is currently coiling at resistance, which indicates a breakout is ahead…but which way?

Double Inside Day

The daily chart shows RIMM has formed a Double Inside Day pattern, or ID2. As you may recall, a double inside day pattern forms when the range of the most recent day falls within the prior day's range AND the range from two days ago falls within the range from three sessions ago.

In essence, Thursday's range was inside Wednesday's range, and Wednesday's range was inside Tuesday's range.

What does this mean? Price is coiling up in anticipation of a breakout with directional conviction.

Of course, it seems the entire market is in a holding pattern until the NFP number comes out, which will likely decide direction and conviction.

Confluence of Resistance

The daily chart shows the ID2 pattern has formed right at 3-month resistance at about $8.40, which also coincides with the monthly R1 Floor pivot.

The fact that this price pattern has formed at this fulcrum means a big move could be ahead, regardless of direction. You see, an upside break through $8.40 leaves clear air above, while another rejection at this level paves the way for another test at the September lows.

Either way, a substantial move could be seen. Let the market decide direction, then execute your plan in the path of least resistance.

Let's see how this one plays out!

By the way, I'm hosting a free market outlook webinar after Tuesday's market. It's always fun to talk shop with others that are passionate about the market, so check it out.

It's free, but space is limited, so make sure you register to reserve your spot. Use this link: http://www.anymeeting.com/PIID=E157DF858249

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

EZPW Bearish Gartley Pattern

A Bearish Gartley Pattern recently completed on Ezcorp (EZPW on NASDAQ.) The XA leg of the Gartley pattern indicates the direction of the trend and the AB=CD symmetry indicates the completion of a correction against the trend. The trade setup was complete on September 14th, 2012 when EZPW traded at 24.55. At this point we would be looking to sell one tick below the low of the September 14th high bar.   

On September 25th, our limit order to sell was hit and EZPW quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out our free introductory video course at at www.geometrictrading.com

 

AAPL is a Buy

Apple, Inc. (AAPL) has been incredibly bullish during the current 4-year rally, offering amazing buying opportunities along the way. The current pull-back could be one of those buying opportunities. Here's why...

Floor Pivot Support

Part of the research I conducted for my book Secrets of a Pivot Boss included pivot-trend analysis. One of the components was how price behaved during trending phases.

One key takeaway from my research was clear - in virtually all strong trending markets price rarely closed below the S1 support level, and mostly never even tested it.

Therefore, if the stock you are trading has remained above the S1 support level for consecutive months, it's likely in a strong bull trend, which means you should be looking to buy into weakness along the way.

Buy the dips.

In the daily chart of AAPL, you see price put in a bullish reversal wick just ahead of October's monthly S1 pivot level, meaning this could be the low for the month.

AAPL has only closed below monthly S1 just once in the last 15 months.

Major Confluence

The daily chart also shows Yesterday's bullish reversal wick candlestick also formed at a 3-way confluence zone that includes the monthly S1 pivot, 5-week visual support, and the 50-day simple moving average.

The market tested the waters below the $655.75 visual support zone, but responsive buyers saw value and bought.

Additionally, the 50-period moving average is a spot where many big players have been known to enter the market during clear trends, which was clearly the case this time around.

It's not a coincidence that the reversal wick formed right at the 50sma, it's first test in over two months.

Buy the Dip

If price remains above the monthly S1 pivot at $646.80, continued uptrending price movement is expected ahead.

If we assume that yesterday's low of $650.65 is the October low, then we can project 5- and 10-day targets of $688.88 and $697.91, respectively, using my ADR Method swing calculations.

Keep in mind, if this is the true point to buy the dip, then much more strength lies ahead, likely toward $750 by the end of November.

Only time will tell.

What are your thoughts? Agree or disagree?

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

5 Reasons the NQ is Headed Lower

The E-Mini NASDAQ 100 was not able to sustain the bullish breakout Monday morning, which led to weakness the rest of the session. Here are five reasons why the NQ is likely headed lower in the days ahead.

1. Rejection at Resistance

Today's intraday rejection at the 2,820 resistance level tells us a lot about where the NQ might be headed in the near term.

The 15-minute chart of the NQ shows price opened the session with initial strength via a gap up and rallied to 2,820 before being rejected at visual resistance and the R2 floor pivot.

Not just rejected…smacked down!

This rejection sent the index into a steady sell-off the rest of the session, which essentially sets up the rest of the reasons on the list. Which brings us to..

2. Failed Inside Day

While the rejection from above is bearish enough, it is amplified when it occurs on the heals of an Inside Day formation. You see, the Inside Day pattern lends itself to major breakouts and follow-through, which didn't occur Monday.

What does this mean? It means initiative bulls did not take the reigns and advance price higher, which is a HUGE tell for the bears.

The fact that the Inside Day pattern was not enough to fuel strength after the initial push higher is indicative of potential weakness ahead.

3. Bearish Outside Day

The daily chart shows the NQ formed a bearish outside day pattern after Monday's session. An outside day pattern develops when the current session's range engulfs the prior day's range.

What makes this outside day pattern more significant is the fact that it opened below the prior day's low, rallied to create a new high above the prior day's high, and then closed back below Friday's low.

Essentially, this price behavior formed a very bearish reversal wick candlestick, which further signifies weakness ahead.

4. Rounded Top

The daily chart also shows that price is currently developing a rounded top pattern, which has been forming over the last four to six weeks.

This type of pattern usually precedes weakness, especially if the NQ remains below the 2,825 level that rejected its advances Monday morning.

5. VPOC at 2,715

Given all of the bearish cues, we'll keep our eye on the 2,715 level as the near term target ahead. Why? Because it's the composite volume profile's Volume Point of Control, which tends to behave as a magnet.

The daily chart shows the 177-day volume profile, which clearly shows the 2,715 level. If price does indeed push lower, look for VPOC to serve as a target for bears looking to cash in on the positions.

The good news? The NQ has trended higher recently, which makes any pull-back to VPOC a buying opportunity. Look for buyers to enter the market 2,715 should a test occur.

If not, we could see tests at 2,670 and 2,635 ahead.

And don't forget, if you buy my book in October, you'll receive a free live webinar by yours truly in November! Read more...

Let's see how this one plays out! Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Inside Day in the E-Mini S&P 500

The chart pattern du jour is the Inside Day, which could make for an exciting beginning to October (and Q4 of 2012!). Here's more…

Inside Day

The daily chart of the E-Mini S&P 500 (ESZ2) shows a clear Inside Day pattern has developed. The Inside Day pattern occurs when the range of the most recent day falls completely within the range from two days ago.

That is, Friday's price range fell completely within the price range from Thursday's market, thereby creating a potentially explosive Inside Day pattern.

Traders love the Inside Day pattern because it is easy to spot, it's development indicates pent-up energy, it tends to lead to big moves, and…it works.

A breakout from the two-day range in the ES could spark a huge move in today's market.

Inside Value

A complementary pattern to the Inside Day formation is the Inside Value setup. The Inside Value pattern develops when the upcoming day's value area falls inside the value area from the prior session.

That is, Monday's value area, as predicted by a Developing Value Area indicator, falls inside the value area from Friday's market.

The 15-minute chart shows the ES has clearly formed this pattern, which has explosive tendencies similar to the Inside Day formation.

Look for a breakout from this pattern to spark a potential Trend Day ahead, especially if price breaks free from Friday's price range.

Narrow Price Range

The recent 3-day price range of the ES also points to potential range expansion ahead. The average 3-day price range has only been 26.50 points, but the current 3-day range is an even slimmer 20.50 points.

Narrow range days typically lead to range expansion, and the current meager 3-day range hints at a breakout move that spark multiple days of expansion ahead.

Watch Friday's price range a breakout in either direction, which could set the tone for October.

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Here's the Dow Game Plan

Now that the Dow Jones ($DJI) got the breakout from the narrow price range we forecasted in our Monday analysis, here's how we'll be playing a potential down move Wednesday.

The Breakout

In Monday's analysis titled Watch the Dow for a Breakout, I wrote that price was coiling for a potential breakout opportunity that could spark the next short term move.

As it turns out, the Dow got a solid downside break through the bottom of the 7-day range at 13,500, which paved the way to a 101-point loss on the day.

The downside break indicates price could be headed to the 13,320 bear target I forecasted in my analysis within 3 to 5 days. Today's Outside Day candlestick pattern further confirms weakness ahead.

Lower Value

Today's downside move, combined with the potential for more downtrending behavior ahead, opens the door to one of my favorite setups - the Lower Value setup.

The 15-minute chart shows the Dow has formed a 2-day Lower Value relationship using the Pivot Range indicator.

The Lower Value relationship develops when the upcoming day's pivot range forms completely lower than the prior day's pivot range. In essence, this relationship indicates continued weakness ahead, especially if Wednesday's Open price confirms the setup.

This is the kind of setup that you can play over and over during a well-behaved trending market.

The Game Plan

If you missed today's move, here's how you can approach tomorrow's market to grab a piece of the action.

Since we have a Lower Value relationship, I'll be looking to sell into any modest strength tomorrow morning, with the intention of riding price to new lows within the current near-term decline, especially if price remains beneath the support-turned-resistance level of 13,520.

If price opens the session below 13,480, look to sell into strength between 13,485 and 13,515. However, if price opens the session above 13,500, look to sell into strength between 13,515 and 13, 540. Look to scale out of your position at the following targets: 13,465, 13,405, and 13,355.

If the $DJI opens the session above 13,540, then market sentiment has clearly shifted and likely means strength ahead. Keep this contingency in mind.

Let's see how this plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Watch the Dow for a Breakout

The Dow Jones Industrial Average ($DJI) continues to hold at highs above the 13,330 resistance level, suggesting further strength ahead. However, recent price activity suggests a breakout in either direction from the current range could spark the next short term move.

Narrow Range

The daily chart of the $DJI shows price continues to hold at highs after breaking through the important 13,330 resistance level a week ago. The 13,330 level had been resistance for the year until the recent breakout, which bodes well for further strength ahead.

However, current price activity indicates a breakout from the current 7-day range could spark a solid short term move, regardless of direction.

You see, the current price range has been extremely narrow, which means the index is coiling ahead of the next big breakout opportunity.

As a matter of fact, the average 5-day range in the Dow has been 289 points, while the current 5-day range is only 144 points. That's a 50% drop in price range, which is rather significant.

The Range Ratio indicator shows a current 5-day reading that is below the .75 level, which is marked in red. This reading generally alerts you to a potential breakout ahead.

Pivot Resistance

The daily chart also shows price is holding right at the monthly R2 Floor Pivot level of 13,620. Since the range congestion has formed above resistance, an upside break is to be expected. A push through 13,620 could spark a nice short term move higher.

However, If price cannot rise above this pivot level, look for a downside push back toward the monthly R1 level at 13,355 for a retest of the breakout zone between 13,330 and 13,355.

As long as the Dow remains above the monthly pivot range (pink lines), continued overall uptrending behavior is expected in the medium term. As a matter of fact, look to buy any pull-back to this zone (13,055 to 13,080) should a retracement occur.

Targets to Watch

If price breaks free from the current 7-day range, look for a move of about 180 points to occur rather swiftly. Therefore, a downside break brings the 13,320 target into play, while an upside break opens the door to 13,830.

Watch 13,500 and 13,650 closely for a breakout.

Let's see how this one plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

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Here's the Game Plan for AAPL

Apple, Inc. (AAPL) got a major breakout today after forming a very tight 5-day range last week. Monday's breakout could spark a solid multi-day advance in the days ahead. Here are the levels to watch for entries and targets.

5BNR Breakout

Apple got a major breakout from a 5-Bar Narrow Range (5BNR) price pattern today, which sparked a solid rally throughout the session.

A 5BNR develops when the current 5-day range is smaller than the 5-day ranges over the last x number of periods (usually 10 or 20 periods).

This price pattern is great at identifying when price is coiling ahead of a potential breakout opportunity, and has a huge success rate.

Despite Monday's major breakout rally, much more strength could be seen ahead.

Average Price Range

Apple's average 5-day price range over the last 5 periods prior to today's breakout was $19.46. However, during the 5BNR the price range was only $9.61, which is far less than usual.

The 5-day price compression indicated a breakout was likely ahead, and Monday's rally of $6.75 indicates there's likely much more strength ahead. You see, since the average 5-day price range was $19.46, AAPL is likely to have a price range of about the same amount over the upcoming 5 days (including Monday).

Therefore, we could see nearly 13 more points of upside movement ahead.

The Game Plan

Monday's breakout led to the formation of a 2-day Higher Value relationship using the Pivot Range, which occurs when the upcoming day's Pivot Range is completely higher than the prior day's Pivot Range.

This is the most bullish 2-day relationship and indicates we could see more upside ahead, especially if price remains above the bottom of the pivot range at $626.60 tomorrow.

If price opens the session above $629 and drops into the pivot range within the first 90 minutes of the day, look to buy between $627.75 and $628.85.

If price opens between $628 and $629, look to buy between $626.60 and $627.75.

All bets are off if price opens the session below $626.50, as a drop back toward $622 may be the end result.

As for targets, look to play to the 5-day ADR Method swing targets of $635.26, $637.85, and $642.71. The first two targets have a great shot at being reached, whereas the last target has about a 50% chance.

Let's see how AAPL plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow us on Twitter: http://twitter.com/PivotBoss

Watch the Dow for a Breakout

The Dow Jones Industrial Average appears poised for a major breakout opportunity in the days ahead. Here's the pattern to watch..

Double Inside Day

The daily chart of the Dow Jones Industrial Average ($DJI) clearly shows the index has experienced several days of range compression. A major breakout is usually the result of this type of behavior, so keep an eye on the Dow in the days ahead.

As a matter of fact, the Dow has formed a fairly rare price pattern that has a huge success rate - the Double Inside Bar (DIB) price pattern (also Double Inside Day or ID2). This pattern forms when the current day's price range falls within the range of the prior session AND the price range of the prior day falls within the range from two days ago.

Essentially, it's a day within a day within a day.

When this pattern develops, a major breakout usually follows. Keep an eye on the recent high (13,200) and low (13,125) for signs of an early breakout opportunity ahead.

Camarilla Pivots

The daily chart also shows the Dow is currently sitting just beneath the monthly H3 Camarilla pivot point (red line), which is typically bearish. If price cannot rise above the H3 pivot at 13,185, we could see a push back toward the L3 pivot at 12,835 soon, especially if a downside break from the DIB pattern occurs.

As you can see, price has honored the monthly Camarilla pivots quite well since June. You'll notice the monthly L3 Camarilla pivot (green line) has been a great zone for buy signals during the recent bull trend.

Keep an eye on the DIB pattern, as a breakout will dictate whether we see L3 at 12,835 or H4 at 13,357 in the days ahead.

If you'd like to read more about the Camarilla Equation CLICK HERE.

Range Clues

The current 3-day price range in the Dow is just 100 points. By contrast, the 5-period 3-day average is 262 points. This means the Dow is clearly coiling for its next major move and a solid breakout could be around the bend.

Again, watch 13,200 and 13,125 for a potential breakout tomorrow.

Let's see how this one plays out!

Frank Ochoa

PivotBoss | Own the Market

Follow Frank on Twitter: http://twitter.com/PivotBoss

Swing Targets for the E-Mini S&P 500

The E-Mini S&P 500 has traded back and forth within the boundaries of a well-developed, uptrending channel over the last two months. Another drop within the channel could easily push price to these key targets. Here's more..

Channel

The daily chart of the E-Mini S&P 500 shows price has traded within a clear upward-sloping channel since June.

Every price move within this channel has been a breath of fresh air, as identifying entries and forecasting targets has been much easier than usual.

As a matter of fact, the last two days have made great short entries for another potential drop within the channel.

Swing Targets

If you are short, or plan to be, these are the swing targets you should look to play to: 1,348.50 and 1,337.75. These targets are the 3- and 5-day swing targets for the current channeling behavior of the ES.

In the last 14 months, these two targets have tested to be between 72% and 74% accurate, so there's a good shot they will be reached, especially should 1,380 continue to hold as resistance.

If price continues higher, watch 1,405.50 and 1,416 for bullish 3- and 5-day targets.

Let's see how this one plays out!

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow Frank on Twitter: http://twitter.com/PivotBoss

Stiff Rejection at 1,336

The E-Mini S&P 500 found major resistance at 1,336 today, which sparked heavy selling pressure throughout the day. Could a trip back toward the June lows be ahead? Here are my thoughts..

Lower Value

The ES opened the session with a gap up this morning, as price opened near the monthly pivot point of 1,336, but was met with immediate selling pressure that lasted the entire session.

The daily chart shows the monthly pivot range has formed a two-month Lower Value relationship for the first time in many months, which is quite bearish. The fact that price rallied into this range and was immediately met with selling pressure is indicative of continued weakness ahead, likely back toward the June low of 1,262.

Of course, the top of the pivot range at 1,350 also coincides with prior support-turned-resistance, which has developed since February.

This is the key line in the sand between bulls and bears.

Volume Analysis

The daily chart also includes a 165-day volume composite chart, which shows that price remains in the upper distribution of the profile - the vertical development portion.

This is good for longer term strength. However, if price cannot rise above 1,350, we could see another round of selling pressure that pushes price back toward the high volume area of 1,200 to 1,250 soon.

The 1,350 level also carries additional significance due to the 3-month VWAP hanging overhead, which creates a confluence of resistance with the top of the pivot range.

Again, more downside is likely to be seen ahead until 1,350 can be crossed and held.

Cheers!

Frank Ochoa

PivotBoss | Own the Market

Follow Frank on Twitter: http://twitter.com/PivotBoss

RBC Bearish Gartley Pattern

A Bearish Gartley Pattern recently completed on Regal-Beliot Corp (RBC on NYSE.) The trade setup was identified in the April 30, 2012 issue of The Geometric Trader - Global Equities Report. The report stated that the setup was complete and to sell on a stop one tick below the low of the high bar. 

The following day a new high was made and the sell order was filled two days later. RBC quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out The Geometric Trader - Global Equities Report at www.geometrictrading.com